The Federal Revenue Board (FRB) issued S.R.O.1190(I)2019 dated October 02, 2019 relating to application of section 8B of Sales Tax Act, 1990 which limits the input tax amount to be adjusted during a period to 90% of the output tax for that period and the excess is carried forward to next tax periods.
S.R.O.1190(I)2019 provides that limit of 90% of output tax will not be applicable in following sectors:
- Persons registered in electrical energy sector
- Oil marketing companies and petroleum refineries
- Fertilizers manufacturers
- Persons making zero rated supplies, including exports, provided that value of such supplies exceeds 80% of value of all taxable supplies in a tax period
- Gas Distribution companies
- Telecommunication services
- Pakistan Steel, Bin Qasim, Karachi
- Registered persons other than manufacturers, making supplies of items covered under the Third Schedule to the Sales Tax At, 1990, on which sales tax has been paid by the manufacturer or importer on retail price, provided that value of such supplies exceeds 80% of value of all taxable supplies in a tax period.
- Commercial importers where value of imports subject to 3% value addition as prescribed in Twelfth Schedule to the Act exceeds 50% of the value of all taxable purchases, including imports, in a tax period.
Further, for Retailers importing goods in bulk and operating chains of stores, the limit of input adjustment has been prescribed at 95% of the output tax for that tax period with excess amount to be carried forward to next tax period.