1. STUDY NOTES ON SALES TAX Overview of Sales Tax System: Sales tax is a Value Added Tax (VAT) system which is collectable from the whole supply chain i.e.

5. Continue Importer/Wholesaler/Distributor Sales Tax @ 17% on value of taxable supply Manufacturer Taxable turnover up to Rs.5 million during the last 12 months Exempt supplies (serial no.3, Table-2, 6 th Schedule) Taxable turnover exceeds Rs.5 million during the last 12 months Sales tax @ 17% on value of taxable supply

6. Continue Retailer Total turnover up to Rs.5 million during the last 12 months Exempt supplies (serial no.3, Table-2, 6 th Schedule) Total turnover exceeds Rs.5 million during the last 12 months Retail tax @ 17% on value of taxable supply, However, presently Govt. fixed the minimum value addition on retailer for payment of retail tax.

8. Continue S.No. Transactions Input Tax Output Tax Pay to FBR 1 Importer’s import value Rs.10,000 Importer sells to a wholesaler of raw materials for Rs.11,000 +1,870 sales tax =Value addition Rs.1,000 (Margin Rs.1,000) 1,700 1,700 1,870 1,700 170

9. Continue S.No. Transactions Input Tax Output Tax Pay to FBR 2 Wholesaler of raw materials buys at Rs.11,000 + 1, 870 input tax and sells to a manufacturer for Rs.11,600 +1972 =Value addition Rs.600 (Margin Rs. 600) 1,870 1,972 102

10. Continue S.No. Transactions Input Tax Output Tax Pay to FBR 3 Manufacturer buys at Rs.11,600+1,972 input tax (his other manufacturing expenses are Rs.9,000) and sells to a wholesaler of finished product at Rs.23,600+4,012 sales tax =Value addition Rs. 12,000 (Margin Rs.3,000) 1,972 4,012 2,040

11. Continue S.No. Transactions Input Tax Output Tax Pay to FBR 4 Wholesaler of finished product buys at Rs.23,600 + 4,012 input tax and sells to a retailer at Rs.24,000 + 4,080 sales tax =Value addition Rs. 400 (Margin Rs.400) 4,012 4080 68

12. Continue S.No. Transactions Input Tax Output Tax Pay to FBR 5 Retailer buys at Rs. 24,000+4,080 input tax and sells to consumer at Rs.24,600+4,182 sales tax =Value addition Rs.600(Margin Rs.600) 4,080 4,182 102 Total 4,182

14. Continue S.No. Transactions Input Tax Output Tax Pay to Govt. 1 Importer’s import value Rs.10,000 Commercial importer is required to pay 17% normal plus 2% of import value and no refund can be claimed by him sells to a wholesaler of raw materials for Rs.11,000+ 1,900 sales tax =Value addition Rs.1,000 (Margin Rs. 1,000)

15. Continue S.No. Transactions Input Tax Output Tax Pay to Govt. 2 Wholesaler of raw materials buys at Rs. 11,000+1,900 input tax and sells to a manufacturer for Rs. 11,600+1,972 sales tax =Value addition Rs.600 (Margin Rs.600) 1,900 1,972 72

16. Continue S.No. Transactions Input Tax Output Tax Pay to Govt. 3 Manufacturer buys at Rs.13,572 (his other manufacturing expenses are Rs.9,000) and sells to a wholesaler of finished product at Rs. 25,572 =Value addition Rs.3,000 Nil Nil Nil

17. Continue S.No. Transactions Input Tax Output Tax Pay to Govt. 4 Wholesaler of finished product buys at Rs. 25,572 and sells to a retailer at Rs.25,972+ 4,415 sales tax =Value addition Rs.400 (Margin Rs.400) Nil 4,415 4,415

18. Continue S.No. Transactions Input Tax Output Tax Pay to Govt. 5 Retailer buys at Rs.30,387 and sells to consumer at Rs.30,987 =Value addition Rs.600 (Margin Rs.600) Nil Nil Nil Total 6,387 Less: Standard amount to be paid to Govt. 4,182 Excess amount paid 1,926