The Federal Board of Revenue (FBR) has tightened procedure for the registered persons for obtaining input tax adjustments under the new General Sales Tax Bill 2010 tabled before the National Assembly here on Friday.
According to section 28 (restrictions on input tax deductions), of the GST Bill 2010, no deduction for input tax is allowed unless, at the time of filing the return in which the input tax is deducted, the person making the deduction holds in the case of goods imported by the person, a bill of entry or goods declaration bearing the name and active registration number of the importer, and duly cleared by the Customs department under section 79 or section 104 of the Customs Act. In the case of a supply of goods to the person, a valid tax invoice be issued by the supplier. In the case of a supply of services to the person, if the supply is made in Pakistan, a valid tax invoice be issued by the supplier.
Despite the said sub-section (1), the Board may allow a person to provide alternative evidence that it has incurred input tax for which a deduction is sought. Where a supply of services that is not made in Pakistan is a taxable supply, the recipient of the supply may not deduct the input tax for that supply unless the recipient has also paid the output tax imposed on the supply.
No deduction for input tax is allowed for a taxable supply the price of which exceeds Rs 50,000 including tax, unless payment for the supply is made through verifiable banking instrument, including on-line or credit card payment showing transfer of money from a bank account of the recipient to a bank account of the seller.
No deduction for input tax incurred on a purchase or import is allowed if, or to the extent that the purchase or import is of a passenger vehicle, or of spare parts or repair and maintenance services for such vehicle, unless the person''s economic activity involves dealing in or hiring out such vehicles and the vehicle was purchased for that purpose.
The purchase or import is used to provide entertainment, to the extent of that use, unless the person''s economic activity involves providing entertainment and the entertainment is provided in the ordinary course of that economic activity and is not supplied to a related person or employee; or the purchase is of a membership or right or entry for any person in a club, association, or society of a sporting, social, or recreational nature.