Sales Tax
Registration
and Return
Streamlined Sales Tax, Hassle-Free Returns
How to Apply for Sales Tax Registration and File Sales Tax Return in Pakistan?
Sales tax registration is a crucial step for any business, as it ensures compliance with the Federal Board of Revenue (FBR), which oversees all business transactions in Pakistan.
As a registered taxpayer, you gain the ability to import and export goods or services, collaborate with reputable companies and government organisations, and participate in public tenders. Without sales tax registration, your business will be ineligible for these opportunities.
Steps to Apply for Sales Tax Registration and File Returns:
1. Register with FBR:
Apply for sales tax registration through the FBR’s online portal (IRIS), providing your business details and required documents (e.g., NTN, CNIC, and business address). Upon approval, you will receive your Sales Tax Registration Number.
2. Track Sales and Purchases:
Maintain accurate records of your business transactions, including sales and purchases. This is essential for calculating input tax (tax paid on purchases) and output tax (tax collected from customers).
3. File Monthly Sales Tax Returns:
Submit monthly sales tax returns via the FBR’s IRIS portal. Report both output and input taxes, and remit the balance to the FBR. Be sure to file on time to avoid penalties.
4. Submit Required Documentation:
Along with your return, submit all relevant invoices and supporting documents to substantiate your tax calculations.
Sales Tax Registration Basics
Before filing your sales tax return, it is essential to first register with the Federal Board of Revenue (FBR). Upon successful registration, you will receive a Sales Tax Registration Number (STRN) along with a user ID and password. These credentials give you access to FBR’s e-filing portal.
To comply with the tax regulations, the sales tax return must be submitted exclusively through the FBR’s e-file portal. This online system ensures that all businesses file their returns accurately and in a timely manner.
Mandatory Documents for Sales Tax Registration;
1. Bank Account Maintenance Certificate mentioning IBAN Number
2. Photo of business premises
3. Electricity Bill of Business Premises
The procedure of sales tax registration
Using IRIS Portal, select Form 14(1). When you select this form, the system will ask you about the following information:
1. Tax Period
2. Individual Type: either Manufacturer or Non-Manufacturer
3. In the case of AOP and Company Detail of Principle Officer/Authorised Representative
4. Bank Account Maintenance Certificate with IBAN Number
5. Business Details, which include business name, activities, address, etc.
6. GPS-tagged photographs of business premises
7. Consumer Number of Gas and Electricity Bill Supplier along with a picture of the Utility Bill
8. Submission of Application Form 14(1)
9. Issuance of Sales Tax Registration Number
Biometric Verification for Sales Tax Registration
After receiving your Sales Tax Registration Number (STRN), you are required to visit an E-Sahulat Centre of NADRA within 30 days for biometric verification. Failure to complete this process will result in your name being removed from the Active Taxpayer List (ATL) for Sales Tax.
The following NADRA E-Sahulat Centres can be visited for biometric verification:
1. [Centre 1 Name & Location]
2. [Centre 2 Name & Location]
3. [Centre 3 Name & Location]
Ensure you complete this process within the 30-day window to maintain your status as an active taxpayer.
Post Verification for Manufacturers
After the initial verification, the Federal Board of Revenue (FBR) may carry out a post-verification process for manufacturers through field offices or third-party agencies authorised by the Board. If any submitted documents are found to be non-genuine, fake, or incorrect, the system will prompt the applicant to provide the correct details within 15 days. Failure to provide the required information within this period will result in the applicant being removed from the Active Taxpayer List (ATL) for Sales Tax.
Sales Tax Registration via the Iris Mobile Application
Sales Tax registration can also be completed through the Iris Mobile Application, specifically the Tax ASAAN Mobile Application. The app provides a user-friendly interface to guide taxpayers through the registration process. Detailed instructions and guidelines for completing the sales tax registration via the Iris Mobile Application are available within the Tax ASAAN Mobile Application, making it convenient and efficient for users to register and manage their tax-related tasks on the go.
Change in particulars of registration
In case there is a change required in the FBR profile or other details as stated in the registration certificate, the registered person shall notify the RTO of the amendment or modification in the prescribed form within fourteen days of such a change.
Transfer of Registration
If a registered person relocates their business activities from one jurisdiction to another, they must provide a valid reason for the change. This request should be submitted through a written application to the Commissioner of Inland Revenue of the respective Regional Tax Office (RTO) overseeing their case. The application will be reviewed, and the transfer of registration will be processed accordingly.
Benefits of Sales Tax Registration
1. Legal Compliance: Ensures your business complies with tax laws and regulations set by the Federal Board of Revenue (FBR).
2. Tax Credits: Registered businesses can claim input tax credits on their purchases, reducing the overall tax liability.
3. Access to Tenders: Sales Tax registration is mandatory for participating in government tenders and contracts.
4. Improved Credibility: Being registered with FBR boosts business credibility with customers, suppliers, and financial institutions.
5. Imports & Exports: Registered businesses can import and export goods and services with tax benefits.
6. Business Expansion: Opens doors to expand and operate in a broader market, both locally and internationally, with access to various tax incentives.
7. Transparency & Recordkeeping: Encourages organised financial recordkeeping, which helps in monitoring business growth and simplifies audits.
8. Legal Protection: Registered businesses have legal protection against tax-related issues, including penalties and disputes.
De-Registration of Sales Tax
De-registration refers to the process of removing a business from the Sales Tax Registration list with the Federal Board of Revenue (FBR). To de-register, an application must be submitted to the Commissioner of Inland Revenue, who has jurisdiction over the business.
Conditions for De-Registration:
1. Ceasing Business Activities: If the registered person ceases to carry on business activities.
2. Exemption from Sales Tax: If the registered person’s supplies become exempt from Sales Tax.
3. Turnover Below Threshold: If the registered person’s turnover falls below the minimum threshold level set by the FBR.
Upon de-registration, the person is no longer required to collect or pay sales tax on their transactions.
Filing Sales Tax Return in Pakistan
Every person registered under the Sales Tax Act, 1990, or the Federal Excise Act, 2005, is required to file a Sales Tax Return on a monthly basis.
A sales tax return serves as a declaration where the taxpayer provides details of transactions during a tax period and reports their sales tax liability.
Steps for Filing Sales Tax Return:
1. Declare input and output tax:
Input Tax: The tax paid on purchases made during the tax period.
Output Tax: The tax collected on sales made during the tax period.
If input tax exceeds output tax, the system generates a refund claim. Conversely, if output tax exceeds input tax, the taxpayer must deposit the excess amount along with the return.
1. Late Filing:
If a sales tax return is not filed within six months, special approval from the Commissioner of Inland Revenue is required to submit the return based on valid grounds.
2. Electronic Filing:
All registered persons must file their sales tax returns through the Federal Board of Revenue’s (FBR) e-filing portal.
3. Revised Sales Tax Return:
A registered person may file a revised return to correct mistakes made in the original return. The revised return can be filed within 120 days of the original filing, subject to the approval of the Commissioner of Inland Revenue.
4. Active Taxpayer List (ST):
The Active Taxpayer List is a public record where one can check the status of active sales tax filers.
Sales Tax Refund:
If the input tax paid on taxable purchases during a tax period exceeds the output tax on exports or zero-rated supplies, the excess amount of input tax can be refunded to the registered person.
The refund must be processed within 45 days of filing the refund claim, subject to the Board’s conditions.
Refund Processing:
The FASTER system is used for processing sales tax refunds. Guidelines for filing Annex H must be followed to claim a refund.
Sales Tax Due Dates:
- Registered persons must file their returns based on their business activities. Under the standard procedure:
- Monthly Returns: Annex C is due by the 10th of the month.
- Payment: Sales tax payment is due by the 15th of the month.
- E-Filing: The return must be filed electronically by the 18th of the month.
Sales Tax Record Keeping:
- Every registered person must maintain sales tax records at their business premises. These records should include:
- Sales records
- Purchases records
- Tax invoices
- Other documents related to the business’s taxable transactions.
Proper record-keeping is crucial for ensuring compliance and smooth processing of returns and refunds.
Record-Keeping for Sales Tax Compliance
As per the Sales Tax Act, 1990, a registered person must maintain detailed records of their business activities to comply with the tax regulations. The following types of records must be kept by businesses:
1. Record of Sales:
The sales record must include the following details for goods supplied or services rendered:
- Description of the goods or services
- Quantity of goods or services
- Value of goods or services
- Name and address of the customer
- Amount of tax charged on the sale
2. Record of Purchases and Imports:
For every purchase and import, the records should include:
- Description of the goods or services
- Quantity purchased or imported
- Value of goods or services
- Name, business address, and sales tax registration number of the supplier
- Amount of tax paid on purchases or imports
3. Record of Payments and Receipts:
All payments related to sales tax above Rs. 50,000 (excluding utility bills) must be made through banking instruments. The records should show:
- Payments made through specified bank accounts of both the seller and the purchaser.
- Photocopies of bank checks and pay orders for sales tax payments and receipts must be kept.
- Bank statements for compliance with Section 73 of the Sales Tax Act, 1990, to avoid audit issues and notices.
4. Other Records to Maintain:
Registered persons must also keep the following records:
- Records of zero-rated and exempt supplies during the tax period
- Invoices, debits, and credit notes
- Banking instruments and statements
- Stock inventory
- Salary and labour expenses
- Utility charges, rent, or lease agreements
- Sale and purchase agreements
5. Retention of Records and Documents:
The law requires that all records and documents must be maintained for six years after the end of the tax period. This ensures that businesses remain compliant and prepared for audits or inspections by the Federal Board of Revenue (FBR).
6. POS Retailers—FBR Integration:
For Tier 1 retailers, there is a requirement for online integration with the FBR through a Point of Sale (POS) system. This ensures proper reporting of sales and taxes to the FBR. Retailers must:
- Follow the Sales Tax Rules, 2006, Chapter XIV-AA regarding online integration.
- Ensure technical documentation for fiscalization is followed.
- Adhere to any extension in the date for integration if applicable.
- Contact focal persons provided by the FBR for assistance during the integration process.