Registration forms are submitted to the Central Registration Office, FBR or VAT/ORT collectors for the assignment of a registration number by persons to be registered under the VAT Act. The taxpayer will then receive a registration certificate. Any person from the above-mentioned sectors making a taxable supply in Pakistan must be registered under the VAT Act. However, manufacturers whose taxable turnover is less than five million rupees and whose electricity bill is less than Rs. Seven lake in the last twelve months are exempt from registration and payment of VAT. A similar exemption also applies to retailers whose total turnover has been less than Rs five million in the last twelve months. The commercial importation of goods is subject to VAT at the rate of 3%, in addition to the VAT due at the standard rate at the import stage. VAT is due at the time of delivery. In the case of services, this is usually the first time taxable delivery is provided or payment is made. In the case of goods, this is usually the time when the invoice is settled with payment. By law, any registrant must submit a declaration of sales made during the last month no later than the 15th of each month. Calculated at 20% of the withholding tax VAT, there is an anti-fraud measure that can be applied to certain customers – usually public authorities that pay their customers.
The same applies to advertising services, including non-resident providers. In these cases, the taxpayer must be a registered withholding office. In the event of the sale or transfer of real estate, stamp duty (at different rates depending on the location of the property) is due on the value of the property. Exporters and certain financial service providers may request a suspension of VAT. The importation of certain basic foodstuffs and agricultural supplies is exempt from import VAT. The federal excise tax (FED) is levied on certain types of production, importation of goods and provision of services at different rates. The sales tax on services, which constitutionally replaces the Fed, is levied and levied by the provinces on services provided in their jurisdiction. However, in the case of tax evasion, the additional tax rate is two percent per month. In cases where input VAT exceeds the VAT payable by the registered person for a tax period due to zero-rated exports or other supplies, the excess amount of input VAT will be refunded to the taxable person within 45 days. In all other cases of excessive upstream tax, the Régie may determine the refund procedure.
Import duties and certain other charges are levied at different rates at the import stage, which are assigned to the Harmonized System (HS) code. To expedite the process, RBF announced a pricing program on August 9 through SRO1005(I)/2001 to encourage Level 1 retailers to integrate with the real-time sales reporting system. Many small and medium-sized Tier 1 retailers of various types have not yet integrated their point-of-sale (POS) with the Federal Board of Revenue (FBR) for real-time sales reporting. To facilitate the integration and installation of such POS systems by these Tier 1 retailers in Pakistan, Tier3 has introduced FBR POS software.  A specialized inventory management and point-of-sale system has been developed specifically for retailers in Pakistan, keeping an eye on information security and data and process integrity. Pakistani companies registered for VAT are required to submit a tax invoice. Simplified invoices are allowed for retail sales. Invoices must contain the following information: The VAT rate is 16% of the value of deliveries. However, certain items are subject to VAT at 18.5% or 21% of the delivery value (see SRO 644(I)/2007 as amended by SRO 537(I)/2008 of 11 June 2008). Supplies by certain persons/sectors are subject to special VAT regulations (e.g.
retail price/fixed tax regime) or otherwise reduced VAT rates. Pakistan`s current tax system is defined by the Income Tax Ordinance 2001 (for direct taxes) and the VAT Act 1990 (for indirect taxes) and is administered by the Federal Board of Revenue (FBR). The KPMG name and logo are trademarks used under license by independent member firms of KPMG`s global organization. KPMG International Limited is an English private limited company and does not provide services to its clients. No member firm is authorized to bind KPMG International or any other member firm to any third party, nor does KPMG International have the authority to bind or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular person or entity. While we strive to provide accurate and timely information, there can be no assurance that such information is accurate at the time it is received or will continue to be accurate in the future. No one should respond to such information without adequate professional advice after a thorough review of the situation. For more information, please contact KPMG`s Federal Tax Legislative and Regulatory Services group at +1 202 533 3712, 1801 K Street NW, Washington, DC 20006. If a registrant fails to pay the tax within the specified time period or claims a tax credit or refund that is not granted to him, or mistakenly applies the zero per cent rate to the supplies he supplies, he must pay the additional tax at the following rates: The following sectors are required to obtain VAT registration and collect VAT on their supplies/services: Tax measures provide an extensive list of taxable services. A system was introduced by manufacturers and authorised wholesalers whereby they were allowed to purchase goods from each other free of VAT and pay sales tax to unauthorised distributors. Imports were subject to VAT, but authorized manufacturers and wholesalers were allowed to import goods without paying VAT.
Later, VAT was due on locally produced and imported goods at the time of their sale and importation. VAT was levied on goods subject to central excise under the Financial Decree of 1956 as if it were a centralised excise duty. In April 1981, following an amendment to the Value Added Tax Act 1951, the collection of VAT on non-excise goods was also transferred to the Central Excise Department. The sales tax was a provincial issue at the time of the division. It was administered in the provinces of Punjab and Sindh as a provincial tax. The sales tax was declared a federal subject in 1948 by the enactment of the General Turnover Tax Act of 1948 and in 1952 this tax was definitively transferred to the central government. Sales tax was levied at the standard rate of 6 cakes per rupee at each stage where a sale was made. The commercial community protested against this system, which led to the passage of the Sales Tax Act of 1951. Under the new tax laws (SRO-1006), all Level 1 retailers are required to integrate their outlets with RBF`s real-time billing system in Pakistan.  It is also mandatory for all restaurants to integrate their points of sale.
These FBR and FBR Integrated POS Systems invoicing systems should be able to handle sales, returns and exchanges. About 11,744 point-of-sale terminals have been integrated into the real-time reporting system as of July 31, the RBF said. Indirect tax, or better known as VAT, also applies to supplies of goods and services. Under the 18th Amendment to the Constitution of Pakistan, provincial governments were granted the right to collect sales tax on services, while the right to collect sales tax on goods was granted to the federal government. As a result, provincial tax authorities were created to administer and collect provincial sales tax in their respective provinces. The sales tax on services is levied by the four provinces, Capital Territory Islamabad, Gilgit-Baltistan, Azad Jammu and Kashmir at rates ranging from 13% to 16%. In general, the manufacturing sector is taxed at the corporate income tax rate, while commercial and import transactions are taxable as a “minimum tax”.