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C.No 1(23) STE/99                                                                                                     Islamabad the 8th April, 1999

The VAT-mode regime envisages a self – policing and self assessment bases sales tax system. It relieves persons also become entitled to claim input tax credits and adjustments against their output tax liability. This benefit of multi stage tax (leviable on the marginal/incremental value addition) is not available to unregistered manufacturers and suppliers. Besides, the registered person is not required to pay 1%further tax (in addition to the standard rate of sales tax) which an unregistered person has to pay and bear the whole incidence of standard rate. Moreover, being a consumption tax the respective seller (of each stage) can pass on the burden to the buyer and incidence of the tax is eventually borne by the final consumer. Registered person can also transact business with and supply goods to the government semi government and defiance department and other autonomous corporations DFIs, banks airlines and limited companies etc; who are otherwise, authorized to deduct advance tax under section 50(4) of the income tax Ordinance,1979.

2. All persons liable to be registered as manufactures producers wholesalers dealers distributors suppliers importers or retailers are therefore well advised to get themselves registered under the sales tax Act 1990 so as to benefit from the said fiscal monetary and trade advantages.
3. However it appears that there are certain apprehension sin the minds of taxpayers that the turnover of the persons registered with sales tax department shall be used for income tax assessments these apprehensions are not correct .Attention in this regard is invited to clause (24) of part IV of the Second Schedule to the Income Tax Ordinance 1979 which reads as follows:-

"(24) the provisions of sections 56,65 or 66-A shall not apply to a registered person under the Sales tax Act 1990 deriving income under the head "business or profession" in respect of an assessment prior to 1999-2000 on account of suppression or non declaration of sales detected on the basis of sales tax returns filed by such persons.

4 CBR ‘s Income tax Circular No 10 of 1996 dated 16.07.1996 explains that: -

"Through the insertion of this new clause (i.e. clause 24 cited above) immunity has been given from re-opening of income tax assessments prior to the year 1999 –2000 to such sales tax payers who declare their correct sales in sales tax returns .the income tan assessments would therefore not be re-opened for the said year on account of suppression or non declaration of sales declared on the basis of sales tax returns filed by such persons"

5. The aforesaid legal provision and ensuing benefits privileges and immunities make it un-ambiguously clear that the advantage of sales tax compliance and sales tax registration far outweigh the irresponsible campaigns misapprehensions and misconception against it . All traders businessmen manufactures producers wholesalers dealers distributors importers suppliers and retailer of sales taxable goods are accordingly advised in their own interest to get themselves registered under the Sales tax act 1990 Non –registration besides creating ineligibility from income tax immunity as aforesaid would also render the offenders liable to legal actions and added burden of sales tax by way of additional tax further tax and penalties which are mandatory under the Sales tax Act 1990

6. The Sales tax Collectorates, F.P.C.C&I, Chambers of Commerce & industry EPB Trade &industry Associations and Groups are also requested to inform all concerned about the benefits, privileges and advantages of registration and compliance of sales tax and procedures made thereunder

(Mumtaz Haider Rizvi)

Chief (Sales Tax )