The Federal Board of Revenue (FBR) Tuesday announced that the sales tax payable on supply of cottonseed oil shall be collected at the time of supply of cottonseed on the basis of quantity of cottonseed supplied or consumed in-house for expelling of oil by composite cotton ginning units.
The FBR has amended Sales Tax (Special Procedures) Rules, 2007 through an S.R.O. 253(1)/2019 to notify Special procedure for sales tax on cottonseed oil expelled by oil expelling mills and composite units of ginning and expelling.
According to an S.R.O. 253(1)/2019 issued by the FBR, the Sales Tax (Special Procedures) Rules, 2007 were amended vide Notification No. S.R.O. 188(1)/2015, dated the 5th March, 2015 in purported exercise of powers of the Federal Government to provide for a special procedure for payment of sales tax on cottonseed oil and to exempt cottonseed oil cake from payment of sales tax.
The said Notification was declared ultra vires by the Lahore High Court and the order of the Lahore High Court was upheld by the Supreme Court of Pakistan vide its order, dated the 16th April, 2018 on the ground that the approval of the Federal Cabinet was not obtained.
It is expedient to provide for special procedure in order to ensure smooth and optimum realization of sales tax revenue, FBR said.
Therefore, the provisions of this Chapter shall apply in respect of sales tax payable on cottonseed oil and payment of the same by the persons engaged in supply of cottonseed as well as composite units of cotton ginning and expelling of oil from cottonseed.
The sales tax payable on supply of cottonseed oil under the Federal Government's Notification No. S.R.O. 213(1)/2013 dated the 15th March, 2013 shall be collected at the time of supply of cottonseed on the basis of quantity of cottonseed supplied or consumed in-house for expelling of oil by composite cotton ginning units.
The amount of sales tax chargeable shall be levied and collected at the time of supply of cottonseed by cotton ginners for in-house consumption, or to any other registered or unregistered person for the purpose of oil extraction or expelling, at the rate of Rs. 7 per 40 kg of cottonseed for the period starting from 1st July, 2018 and ending on the 30th June, 2019 (both days inclusive) and Rs. 8 per 40 kg of cottonseed for the period starting from the 1st July, 2019, FBR said.
All cotton ginners, if not already registered or required to be registered, shall obtain sales tax registration for the purpose of these rules, FBR said.
The amount of sales tax so charged and collected by the cotton ginners shall be declared in the monthly returns and shall be deposited as such without any input tax adjustment.
The suppliers of cottonseed shall mention sales tax charged separately on the sales tax invoice to be issued by them.
The oil expelling units using the cottonseed on which sales tax has been charged and collected in the aforesaid manner shall be exempt from payment of sales tax on the supplies of oil cake produced from such cottonseed.
The ginner shall submit a certificate to the Commissioner having jurisdiction by the 15th day of the month following the tax period for the quantity of cottonseed supplied to the growers for sowing purpose.
Each ginning unit including a composite ginning unit shall submit to the Commissioner of Inland Revenue having jurisdiction monthly statement of production and supply of ginned cotton, cottonseed and cottonseed oil in the format set out by the 15th day of the month following the tax period.
A ginning unit or, as the case may be, a composite ginning unit shall, at the time of commencement of ginning activity and at the time of closure thereof, inform the Commissioner of Inland Revenue having jurisdiction within three days of such commencement or closure, as the case may be.
Each ginning unit including a composite ginning unit shall, within 15 days of the cessation of the ginning activity, furnish to the Commissioner of Inland Revenue having jurisdiction a statement regarding production and supply of ginned cotton, cottonseed, cottonseed oil, oil cake and oil dirt in the format set out.
Where the cotton ginner or the composite cotton ginning unit fails to furnish any statement or certificate as required under this Chapter, he shall be liable for penal action as provided for under serial No. 17 of the Table in section 33 of the Sales Tax Act, 1990, FBR added.