ISLAMABAD: Federal Board of Revenue (FBR) has directed field formations to identify distributors/dealers who are engaged in selling goods originating from Azad Jammu & Kashmir (AJ&K) to ensure payment of sales tax on such items.In this regard, the FBR has issued sales tax general order 107 of 2019 here on Wednesday.
According to media, the question has been raised regarding chargeability of sales tax in Pakistan on the goods originating from AJ&K, which have been exempted from payment of sales tax under the AJ&K law. The issue has been examined under the Sales Tax Act, 1990 as in force in Pakistan and the matter is clarified as under:
Firstly, the sales tax on supplies originating from AJ&K is payable in AJ&K; however,dealers/ distributors of such products located in Pakistan are required to discharge their liability on the value added on such products after adjustment of input tax paid in AJ&K as provided in section 7 read with section 2(14)(e) of the Sales Tax Act, 1990. It is further highlighted that under an AJ&K notification No. FD/Tax 1145- 1245/95, dated 8.2.1995, sales tax is exempted on all goods manufactured in AJ&K except some specified items.
It is emphasized that such notification shall not apply to supplies made in Pakistan and the distributors/dealers in Pakistan of such items originating from AJ&K shall charge sales tax at applicable rates and values, or printed retail price in case of items falling in the Third Schedule to the Act, and deposit the same in Pakistan as per law. In case the items are exempted from tax in AJ&K, there shall be no input tax paid in AJ&K, however, any deduction of any input tax paid in Pakistan shall be available under law.
In case a manufacturer in AJ&K establishes self-owned distribution, wholesale or retail establishment in Pakistan and takes the pretext that the supply is originating from AJ&K and is not subject to sales tax law in Pakistan, it is clarified that the establishment of such a concern in Pakistan and making of supplies by the same, shall be construed as engaging in taxable activity and making supplies in Pakistan, and such distribution, wholesale or retail concern shall be required to get itself registered and deposit sales tax on its supplies in Pakistan as per law, the FBR maintained.
Accordingly, the field formations are advised to identify distributors/ dealers of such items in Pakistan and ensure payment of due sales tax by them under law.
