A tax paid to the government for the sale and delivery of particular goods and services is referred to as a sales tax. The Sales Tax Act of 1990 applies to practically every business that imports, exports, sells, or buys items within its authority. This means that everyone making taxable supplies, including zero-rated supplies, in Pakistan, whether they are an importer, an exporter, sellers, distributor, a retailer, or a wholesaler, with the Federal Board of Revenue (FBR), register for sales tax. Let’s discuss how to do registration for sales tax in Pakistan.
In Pakistan, buyers have to pay sales tax charges in proportion to cost of items and services they are buying. Moreover, the government of Pakistan receives a significant portion of its revenue from sales taxes.
Tax is one of the main sources of income in all of the ways that the government generates income, along with interest, dividends, trade gains, etc. Someone once stated, “A tax is a fine for doing something right while a fine is a tax for doing something wrong.”
How do registration for sales tax?
To do registration for sales tax in Pakistan must follow the following procedure:
- The individual who wants to register for sales tax must submit the application to the CRO. Or Central Registration Office, using Form (STR-1), either online or through courier or postal services. The applicant may also deliver the application in paper copy to the LRO, or Local Registration Office. Send the application electronically to the CRO after an in-depth review of the documents and any necessary editing.
- Moreover, the applicant must carefully and correctly complete the application according to the instructions included in the form.
- The CRO mails the applicant on Form (STR-5) a registration certificate with a registration number after authentication.
Normally, the CRO validates the provided information using the data available. But, occasionally, it requires that the LRO investigate to verify the authenticity of the declaration contents presented by the applicant. Furthermore, the CRO reserves the right to reject the application while providing the applicant with notification and an explanation.
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Documents Required For Sales Tax Registration
- GPS-tagged images of the business premises
- Electricity Bill for the Business Premises
- Bank Account Maintenance Certificate stating IBAN Number
Who Is Responsible for Sales Tax Payments?
The tax authorities can only assess the sales tax liability with respect to the registered taxpayers, according to section 25 of the 1990 Sales Tax Act. Apart from some agricultural products, computer software, some pharmaceuticals, chicken feed, and other items listed in the 1990 Sales Tax Act, sales tax is additionally levied on all imported and locally produced commodities.
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Furthermore, the following business sectors must register for sales tax. Also, to charge clients sales tax on their services or goods:
- Retail
- Manufacturing
- Wholesale
- Import
- Distribution
- Services
Who Must Register for Sales Tax?
Every single person who works in one of the previously mentioned industries and makes taxable supplies in Pakistan is required by law to register for sales tax. However, the value of taxable items supplied during a tax term through the previous 12 months ending a tax term cannot exceed Rs. 10 million, and the value of annual utility (telephone, gas, and electricity) bills cannot exceed Rs. 800,000.
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Sales Tax Returns
According to the law, every registered individual must file a return by the fifteenth of each month for the preceding month’s sales. Moreover, every registered person is required to submit their returns online; in this case, the reimbursement must be made by the 15th, and returns can be submitted on the FBR’s e-portal by the 18th.
Refunds of Sales Tax
When the amount of input tax is more than the amount of output tax owed by the registered person for a tax period due to exports or other zero-rated supply, the excess input tax is reimbursed to the taxpayer within 45 days. Furthermore, the Board may establish the process for repayment in any other circumstances of excess input tax.
