‘Sales tax applicable on goods supplied from AJK’

KARACHI: The Federal Board of Revenue (FBR) on Thursday directed its offices to ensure sales tax collection on goods supplied from Azad Jammu and Kashmir (AJK) across the country.

The FBR issued instructions to the tax offices across the country following the misconception that goods manufactured in AJK were exempted from sales tax under the state’s laws and therefore the same exemption was also available across the country.

The FBR said the sales tax on supplies, originating from AJK, is payable in AJK. However, dealers/distributors of such products located in other parts of the country are also required to discharge their liability on the value-addition on such products after adjustment of input tax paid in AJK as provided under the Sales Tax Act 1990.

In February 1995, AJK government exempted all the goods manufactured in the state from sales tax. However, the exemption is not available for the specified items. Sources said the industrial units were relocated to AJK in the past to avail the tax incentives.

The FBR said such notification would not apply to supplies made in the country, and the distributors/dealers of such items originating from AJK “shall charge sales tax at applicable rates and values on printed retail price in case of items falling in the Third Schedule to the Sales Act 1990, and deposit the same in Pakistan as per law”.

“In case of items exempt in AJK, there shall be no input tax paid in AJK, however, any deduction of any input tax paid in Pakistan shall be available under law,” the FBR said.

“In case a manufacturer in AJK establishes self-owned distribution, wholesale or retail establishment in Pakistan and takes the pretext that the supply is originating from AJK and is not subject to sales tax law in Pakistan, it is clarified that the establishment of such a concern in Pakistan and making of supplies by the same shall be construed as engaging in taxable activity and making supplies in Pakistan, and such distribution, wholesale or retail concern shall be required to get itself registered and deposit sales tax on its supplies in Pakistan as

per law.” The FBR directed the tax offices to identify distributors / dealers of such items in the country and ensure payment of due sales tax by them under law.