Adjustment of input tax paid on services (provincial Sales Tax)
Federal Government has issued a notification No. SRO____/(I)/2014 dated 26.01.2014. Through this notification Federal Government has notified that input tax paid on services liable to provincial sales tax shall be treated as input tax for the purposes of the Sales Tax Act, 1990.
This notification has been made effective from 01.07.2013.
Issuance of this SRO has set a knot on the long outstanding issue of cross adjustment of input tax between FBR, SRB and PRA.
Even after issuance of the notification, the following issues needs to be adressed for smooth cross adjustment of sales tax.
1- Issue of adjustment of input tax paid on services prior to six months. Currently ST return of FBr does not cater such input tax and taxpayer is required to file refund claim for the same.
2- Issue of input tax paid to such service providers who are not registered with FBR. The current ST return treat such provincial registered persons as un-registered persons and input against such purchases is automatically withheld / disallowed.