ISLAMABAD: The Federal Board of Revenue (FBR) has declared that computerised arms licenses in the form of cards being supplied by Nadra to the federal government and the provincial governments attract a standard rate of 18 percent sales tax.

The Federal Tax Ombudsman (FTO) has also directed the FBR to examine the chargeability or otherwise of sales tax under the Sales Tax Act, 1990 on computerised arms licenses.

While disposing of a complaint, the Tax Ombudsman has directed the FBR to examine chargeability or otherwise of sales tax under the Sales Tax Act, 1990 on computerised arms licenses.

Computerised arms licences: FBR asked to confirm sales tax chargeability

Briefly, the complaint was filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTC Ordinance) against inaction on the part of the FBR to take cognizance of the fact that the Nadra, Islamabad was/is not charging sales tax on the supply of goods in the form of (i)Computerised arms licenses cards.

During the hearing held on 10.02.2023, Shehzad Akhtar, while representing the Nadra stated that they are providing “Services” to the Ministry of Interior for printing and supplying cards. The complainant reacted that the supply of cards is in fact “supply of goods as ‘card’ falls within the definition of “goods” under the Sales Tax Laws.

After elaborate discussion during the course of the hearing, the FTO made findings to the Revenue Division to examine chargeability or otherwise of sales tax under the Sales Tax Act, 1990 on computerised arms licenses in the form of cards, being supplied by the Nadra, Islamabad to the federal government, and the provincial governments on the analogy of chip-based vehicle registration cards, the LTO, Islamabad has stated that “Under section 3 (2B) of the Islamabad Capital Territory (Tax on Services) Ordinance, 2001, the tax levied under sub-section(l) is not applicable to regulatory and licensing services rendered or provided by an organisation established under a Federal Statute. The Nadra has been established under the National Database and Registration Ordinance, 2000 which is a Federal Statute. Therefore, sales tax on arms licensing services of the Nadra is not applicable.

The legal position is that clause (b) of sub-section (2) section 9 of the FTO Ordinance, 2001 bars jurisdiction of the FTO, inter alia, in the matter of “determination of liability” of tax on duty FBR vide letter dated 10.04.2023 has determined that computerised licenses in the form of cards being supplied by the Nadra, Islamabad to the federal government, and the provincial governments attract the charge of sales tax at standard rate.

Copyright Business Recorder, 2023