Commercial importers are facing difficulties in filing their Sales Tax Returns due to the unconceivable format of the return. Kindly refer to the format of Sales Tax Return-Cum-Payment Challan for Commercial Importers under Rule 12 (Annexure B), Chapter II of SRO 484(I)/2004 and the Ruling issued as per publication in the Daily Business Recorder of Tuesday the 15th August, 2004 (around the last date of filing of Sales Tax Return for the month of July 2004).
Apparently the ruling is not in line with the above S.R.O. and the provisions of Sales Tax Act 1990 (Pl. refer definition of taxable supply u/s 2(41) read with value of supply u/s 2(46) of the Sales Tax Act 1990). If the Ruling is followed, the value as per sales tax return (column 7) and as per sales tax records would not match.
It is obvious that as long as the commercial importer pays sales tax on value addition and sells out the entire lot, no complication/confusion arises, even if the registered taxpayer disposes offer the imported lot at over 10% value addition. All he has to do is to deposit the sales tax recovered in excess of 10%.
Annexure B column (11) Total Sales Tax payable [7-(5+6+8)-8A+(9+10)] clearly allows adjustment of Sales Tax on value addition already paid to Treasury Challans which is logical. No carry forward on account of value addition results as due to the total absorption of tax paid on value addition.
The problem arises when the entire lot is either not sold or sold partially. Let us appreciate the problem by taking a practical example of a single lot, assuming no opening stock for the sake of simplicity, and ignoring column 5 & 6 of the return being irrelevant to the issue for the time being.

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Import    10,000 units @ Rs 12      = Rs 120,000/=
Sold       2,000 units @ Rs 13.20  = Rs  26,400/= (10% value addition)
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Sales tax return-cum-payment challan (Relevant Portions Only)
                                             Value Excluding
                                                 Sales Tax     Sales Tax
------------------------------------------------------------------------
Taxable Supplies (Column 07) (Rs 24,000*1.1)     Rs 26,400      Rs 3,960
Taxable Imports (Column 08) (10,000 units*12)      120,000      (18,000)
Sales Tax on value addition already paid to  Treasury Challans
(Column 08A) (Rs 120,000*0.1*0.15)=Rs (1,800)
Total Sales Tax Payable Column (11) [7-(5+6+8)-8A+(9+10)]    Rs (15,840)
+3,960-(0+0+18,000)-1800+(0+0)
Sales Tax to be carried forward as per column 13
Rs 18,000-(Rs 3,960+Rs 1800)                                   Rs 12,240
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According to the format of the Return and the Clarification given in the press, the sales tax on value addition Rs 1,800/= on the entire consignment cannot be carried forward.
The question arises where the importer has made partial supply of 2000 units as above. What will be the case when subsequently the registered tax payers makes supply of the remaining 8,000 units including value addition of 10% (which (s) he is bond to do). If the carried forward tax on value addition is not available (s) he would be paying sales tax on value addition twice as given in the following example assuming the remaining lot is sold in subsequent tax period.

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Sales Tax Return-Cum-Payment Challan (Relevant Portions only)
                                             Value Excluding
                                                 Sales Tax     Sales Tax
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Column 7 (8,000 X Rs 12.00 X 1.1)                Rs 105,600    Rs 15,840
Less: Column 5  Sales Tax Carried forward                         12,240
Sales Tax Payable (Subsequent Period)                           Rs 3,600
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Assuming no other entries, sales tax to the tune of Rs 3,600/= would be payable for the subsequent period as above. Ultimately the registered person would end up paying excess amount as follows:

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                                             Value Excluding
                                                 Sales Tax     Sales Tax
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Total Taxable Supplies (10,000*12.00*1.1)      Rs 132,000
Sales Tax on Total Taxable Supplies                            Rs 19,800
Less: Total Input Tax on Imports                                  18,000
           Net Sales Tax Payable on the Entire Lot              Rs 1,800
Less: Sales Tax finally paid on subsequent return as above         3,600
           Sales Tax Paid in Excess (not due under the law)   Rs (1,800)
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As pointed out earlier the Ruling is not in line with the S.R.O. and the specific provisions of Sales Tax Act. The format of the return as per the S.R.O. needs to be amended under the law. In the present circumstances the compliance with the impugned format is practicable only if either:
i) the importer is immuned, on payment of sales tax on value addition, from accounting for in subsequent returns any remainder supplies of the entire lot imported, including exemption from preparing sales tax invoices and maintaining sales tax records with respect to that particular consignment unless supplies are made at over 10% value addition.
OR
ii) the importer is allowed to claim proportionate input tax in every sales tax return filed for the part of the consignment sold. This would make the entire affair very complicated in case of multiple consignment carrying stocks.
It is, therefore, suggested that the present format of Sales Tax Return-Cum-Payment Challan be changed to allow carry forward of all types of input/unadjusted tax paid which, in our opinion, is the basic right of the registered tax-payer and is not likely to result in any loss of revenue.