The Federal Board of Revenue (FBR) has clarified that further tax @ 2 percent shall be charged on supply of finished fabrics which have undergone all industrial processes like calendaring, dying, bleaching and printing and are ready for use by the general public irrespective of the fact whether they have to undergo such processes like cutting, stitching etc.
According to a recent FBR''s clarification issued to Chief Commissioner-IR, Regional Tax Office, Faisalabad, the FBR has clarified the chargeability of further tax on goods under SRO 1125(1)/2011 read with SRO 584(1)/2017.
The issue of chargeability of further tax under SRO 1125(1)/2011, dated 31.12.2011 within the meanings of condition (xiv) inserted in the said SRO vide SRO 584(1)/2017, dated 01.07.2017 has been examined particularly with respect to chargeability of further tax on supplies of finished fabrics and is clarified hereunder.
Condition (xiv) added in SRO 1125(1)/2011 through SRO 584(1)/2017 provides as under:
''(xiv) in case the goods covered under this Notification are supplied to a person who has not obtained registration number, further tax prescribed under sub-section (IA) of section 3 of the Act shall be charged at the rate of one percent of the value whereas further tax at the rate specified in the said sub-section (1A) of section 3 shall be charged on supplies of finished articles."
The said reproduced condition provides that further tax at the rate specified in sub-section (1A) of section 3, ie, @ 2% shall be charged on supply of finished articles. The term finished articles has not been defined under the Sales Tax Act, 1990. However, in the context of finished fabrics, the term includes fabric which does not have to undergo any further industrial process like calendaring, dying, bleaching and printing and is ready for use by the general public irrespective of the fact whether it has to undergo such processes like cutting, stitching, etc.
Therefore, it is hereby clarified that further tax @ 2% as provided under sub-section (1A) of section 3 of the Sales Tax Act, 1990 shall be charged on supply of finished fabrics which have undergone all industrial processes like calendaring, dying, bleaching and printing and are ready for use by the general public irrespective of the fact whether they have to undergo such processes like cutting, stitching etc, the FBR added.
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