SOLVED PAST PAPERS SALES TAX NUMERICALS OF ICMAP STAGE IV - (2003 TO 2015)

Transcription

1 Chapter 13 SOLVED PAST PAPERS SALES TAX NUMERICALS OF ICMAP STAGE IV - (2003 TO 2015) Note: All the following questions have been solved under the Sales Tax Act effective from July 1 st 2015, except as provided in the Finance Act, Q.No. 6(a) March 2015 Karven Limited is a company registered under the Sales Tax Act, The company is engaged in the manufacturing, import and export of chemical products. Following activities were carried out by the company dating the month of January 2015: Purchases: Local: 000 Raw materials from registered suppliers 800,000 Raw materials from non-registered suppliers 400,000 Imports: Invoice value (converted into pak Rupees) 150,000 Customs duty 37,500 Value inclusive of customs duty 187,500 Federal excise duty 6,250 Manufacturing and other costs 220,000 Supplies: Sales to registered customers 1,400,000 Sales to non-registered persons (commercial/industrial Customers) 600,000 Sales of exempted supplies 400,000 Exports 220,000 Additional Information: Sales tax of 50,000, 20,000 and 16,000 was paid in cash on account of electricity, gas and telephone bills respectively, directly consumed for taxable activities. In the light of the provisions of the Sales Tax Act, 1990, compute the net sales tax payable for the month of January Substantiate your answer with notes. Solution: Karvan Limited Computation of Sales tax payable / refundable For the period of January 2016 Output tax in '000' Sales to registered customers 238,000 Sales to unregistered person 102,000 Sales of exempted supplies - Conceptual Approach to Taxes 691

2 Exports - 340,000 Input tax On taxabale supplies 128,960 On utilities bills ( 50, , ,000) 86,000 A 214,960 or 90 % of 340,000 B 306,000 Lower of A and B (214,960) Sales Tax payable 125,040 Add: 2% further sales tax on 400,000 8,000 Sales tax payable with return 133,040 Sales Tax refundable 25,792 Input tax for apportionment Purchase from registered person 136,000 Imports (150, , ,250) x 17% 32, ,938 Apportionment of input tax Supplies to: Amount Input Tax Registered person 1,400,000 90,272 Un-registered person 600,000 38,688 Exempted Supplies 400,000 25,792 Exports 220,000 14,186 2,620, ,938 Notes - 1 Manufacturing and other costs will be Q.NO. 5(b) August 2014 Sitara Manufacturers (SM) deals in the taxable and exempted supplies. SM provided following information for determination of its sales tax liability for the month of June, SM made purchases amounting 800,000 from Elahi & Sons who is registered person. Mr. Ahsan invoiced 150,000 to SM without charging any sales tax. SM further incurred manufacturing and other cost amounting 150,000. Out of total stock, SM supplied goods of worth 1,500,000 to Sidra & Co., which is a registered company under the Sales Tax Ac t, In addition to above SM made exempted supplies of 600,000 and supplied goods of worth 500,000 to nonregistered person. SM also paid sales tax on electricity bill amounting 18,000. Compute sales tax liability of SM under the Sales Tax Act, 1990 for the month of June, Solution Sitara Manufacturing NTN # STRN # Computation of Sales tax payable / refundable For the month of June Conceptual Approach to Taxes

3 Output tax Sales to registered person 1,500, ,000 Sales to un-registered person 500,000 85,000 Exempt supplies 600, ,000 Input tax Input tax admissible W-1 118,462 or 90 % of 340, ,000 (118,462) 221,538 2% further tax on 500,000 10,000 Sales tax payable with return 231,538 Residual Input tax Purchase from registered supplier 800, ,000 Electricity bill 18, ,000 Apportionment of Residual input tax taxable supplies 2,000, ,462 Exempt supplies 600,000 35,538 2,600, ,000 Q.NO. 6 Spring 2014 Beta (Pvt.) Limited is engaged in imports, trading and local manufacturing of certain taxable consumer goods including products like detergents which are subject to levy of sales tax on retail price basis. During the month of December, 2013 the following information of the company is complied: Sales: '000 Sales of locally manufactured taxable goods (other than detergents) 20,000 Sales of imported finished goods on value addition basis 2,750 Sales of imported detergents to wholesalers [31, each packet] 7,500 Sales of locally manufactured detergents to wholesalers [30, each packet] 6,750 Imports and Local Purchases: Import of raw materials for in-house consumption - Taxable 10,000 Import of finished goods - other than detergents 2,000 Import of finished goods - detergents 1,000 Local purchases of raw materials - Taxable 8,750 Additional Information: Retail price of detergents (imported and locally manufactured) is 250 per packet of 1.5 kilograms each. Note: All above amounts are exclusive of sales tax. In the light of the provisions of the Sales Tax Act, 1990 and rules made there under, calculate the sales tax liability of Beta (Pvt.) Limited for the month of December, Solution: Beta (Pvt.) Limited Conceptual Approach to Taxes 693

4 Output tax on: '000 Sales of locally manufactured taxable goods (20,000,000 x 17%) 3,400 Sales of locally manufactured detergents [(30,000 products X 250)] x 17% 1,275 Sales of imported detergents to wholesalers [(31,250 products X 250)] x 17% 1,328 Sales of imported finished goods on value addition basis (2,750,000 x 17%) 468 Total Output Tax (A) 6,471 Input tax on: Local purchase of raw materials 1,488 Import of raw materials for in-house consumption 1,700 Import of finished goods - other than detergents [ 2(M) x 20%] 400 Import of finished goods - detergents [ 1(M) x 20%] 200 Total input tax (B) 3,788 90% of output tax (Note - 1) (C) 5,823 Less admissible tax credit: lower of (B) or (C) (D) 3,788 Balance sales tax payable [A less D] 2,683 (N - 1) (N - 2) As the registered person given in this question is engaged in various types of activities and none of the clause under SRO 647(I)/2007 dated June 27, 2007 is applicable therefore 90% of output tax limitation on input is applicable U/S 8B of the Sales Tax Act, % further sales tax u/s 3(1A) has not been charged as the supplies are made to registered wholesalers and further final consumers (against supplies made) are not required to be registered under the Sales Tax Act, Spring Q. 5 b Hassan Associates manufactures and supplies Product A and Product B. Hassan Associates is registered under the Sales Tax Act, Following information has been extracted from its records for the month of May 2013: Rupees in million Purchase of raw material from registered person To manufacture Product A 900 To manufacture Product B 300 Purchase of raw material from unregistered person To manufacture Product A 150 To manufacture Product B 200 Import of raw material to manufacture Product A and B 450 Sale of Product A To registered person 800 To unregistered person 250 Sale of Product B To registered person 500 To unregistered person 150 Sale return during the month Product A 50 Product B 30 Sales tax paid on electricity bill 15 Further information: 694 Conceptual Approach to Taxes

5 Product B is exempt from the sales tax. Sales tax credit brought forward from previous month amounted to 25 million. An import bill dated November 10, 2012 amounting to 25 million had not been claimed inadvertently. This oversight was detected during the month. Sales tax is payable at the rate of 16%. All the above amounts are exclusive of sales tax. In the light of the Sales Tax Act, 1990 and rules made there under, calculate the following for the month of May 2013; Sales tax payable / refundable Input tax to be carried forward, if any. Solution: HASSAN ASSOCIATES SALES TAX LIABILITY TAX PERIOD: MAY 2016 OUTPUT TAX "000" "000" On total taxable supplies [( ) x 17%] (Note - 1) 179 Less: Return (50 x 17%) (9) 170 INPUT TAX On taxable supplies only for product A U/S On taxable supplies U/S 3 (W - 2) 54 Add: sales tax credit brought forward from previous month 25 (A) % of output tax (Note - 2) (B) 153 Less admissible tax credit: lower of (A) or (B) 153 Balance sales tax payable 17 Sale tax excess payment carry forward (A - B) 79 WORKING W-1 Residual input tax : Import for taxable & exempt goods ( 450 x 17%) 77 Sale tax on electricity bill 15 Less: Import bill un claimed ( 25 x 17%) (4) Total residual input tax 87 W-2 Apportionment of residual input tax [U/R 25 of Sales Tax Rules, 2006] Supplies Residual input tax "000" "000" Taxable supplies 1, Exempt supplies Total supplies 1, (Note - 1) It has been assumed that 2% further tax u/s 3(1A) is not applicable on local taxable supplies to unregistered persons under SRO 648(I)/2013 dated July 09, 2013 otherwise further tax shall be accounted for and paid seperately without adjustment of the same against input tax / refund of the registered person and further it shall also not be considered for the computation of 90% limitation on output tax. Conceptual Approach to Taxes 695

6 (Note - 2) As it is case of a manufacturer and none of the clause under SRO 647(I)/2007 dated June 27, 2007 is applicable therefore 90% of output tax limitation on input is applicable U/S 8B of the Sales Tax Act, Autumn Q. 5 Bashir corporation is registered with the sales tax department as manufacturer, exporter and the distributor, it has the following transactions for the month of january, 2013: Rupees Purchases from registered persons 6,000,000 Purchases from non-registered persons 720,000 Exports 1,000,000 During a tax period the company supplied goods worth 7,000,000. As per normal business practice, the company sells the goods at a discount of 20 % of the retail price, Compute the sales tax liability of Bashir corporation for the month of junuary Solution: BASHIR CORPORATION PVT LTD COMPUTATION OF SALES TAX FOR THE MONTH OF JANUARY 2016 OUTPUT TAX Sales to registered person U/S 3 (N - 2) ( 8,750,000 x 17 %) 1,487,500 Export [U/S 4 read with 5th Schedule] ( 1,000,000 x 0%) - Total output tax 1,487,500 LESS : input tax Purchased from registered person ( 6,000,000 x 17%) 1,020,000 Purchased from un registered person (N - 3) - 1,020,000 Balance tax payable 467,500 (N - 1) As the zero rated supplies are less than 50% of all taxable supplies under SRO 647(I)/2007 dated June 27, 2007, therefore 90% limitation is applicable U/S 8B of the Sales Tax Act, Howeve the same has not been shown as the available input tax is already less than 90% of the total output tax. (N - 2) Retail price of goods after discount 7,000,000 Retail price ( i.e sale price plus discount allowed ) (7,000,000 x 100 / 80) 8,750,000 (N - 3) As purchases from non-registered persons are without sales tax invoices hence the same shall be without sales tax u/s 23(2) of the Sales Tax Act, 1990, therefore the question of adjustment of input tax in not applicable. Q.4 (c) August 2012 Pak Manufacturing Company Limited is engaged in manufacturing of both taxable and exempted supplies. Following are the transactions for the month of June: 696 Conceptual Approach to Taxes

7 Rupees Supplies to registered manufacturers 4,250,000 Supplies to non-registered retailers 3,250,000 Sales of exempted supplies 600,000 Purchases from registered persons 3,000,000 Purchases from non-registered persons 2,100,000 Import of raw material 1,750,000 Compute the sales tax liability of Pak Manufactur ing Company for the month of June. Solution Q.4 (c) August 2012 Pak Manufacturing Company Computation of sales tax liability Output tax On supplies to registered manufacturers U/S 3 ( 4,250,000 x 17%) 722,500 On supplies to non-registered retailers U/S 3 (3,250,000 x 17%) (N-1) 552,500 On sales of exempted supplies [U/S 6 read with 6th Schedule] - 1,275,000 Input tax allocated to taxable supplies (W-1) (A) 747,685 90% of output tax [ 1,275,000 x 90%] (N - 3) (B) 1,147,500 Less: admissible input tax: Lower of (A) or (B) 747,685 Balance sales tax payable 527,315 (W-1) Residual input tax Purchases from registered persons ( 3,000,000 x 17%) 510,000 Purchases from non-registered persons (N - 2) - Import of raw material ( 1,750,000 x 17%) 297, ,500 Allocation of residual input tax: [U/R 25 of the Sales Tax Rules, 2006] Supplies Residual input tax Supplies to registered manufacturers 4,250, ,688 Supplies to non-registered retailers 3,250, ,997 Sales of exempted supplies 600,000 59,815 8,100, ,500 Input tax allocated to taxable supplies (W-1) (423, ,997) 747,685 (Note - 1) It has been assumed that 2% further tax u/s 3(1A) is not applicable on local taxable supplies to unregistered persons under SRO 648(I)/2013 dated July 09, 2013 otherwise further tax shall be accounted for and paid seperately without adjustment of the same against input tax / refund of the registered person and further it shall also not be considered for the computation of 90% limitation on output tax. (Note - 2) (Note - 3) As purchases from non-registered persons are without sales tax invoices hence the same shall be without sales tax u/s 23(2) of the Sales Tax Act, 1990, therefore the question of adjustment of input tax in not applicable. As it is case of a manufacturer and none of the clause under SRO 647(I)/2007 dated June 27, 2007 is applicable therefore 90% of output tax limitation on input is applicable U/S 8B of the Sales Tax Act, Conceptual Approach to Taxes 697

8 Spring Q. 7 Mr. Folad is registered under the Sales Tax Act, 1990 and is engaged in the business of manufacture and supply of home appliances. Following information has been extracted from the records of Mr. Folad for the month of February Rupees Purchases Local From registered suppliers 70,250,000 From un-registered suppliers 15,750,000 Supplies: Local taxable supplies to registered persons 72,870,000 Local taxable supplies to un-registered persons 9,850,000 Exports to Canada and USA 12,700,000 Following additional information is also available: (i) A new machine purchased for 12 million was commissioned into operations during February (ii) Sub-standard supplies amounting to 4,500,000 were returned to vendors. Proper debit/credit notes were raised in this regard. (iii) Goods worth 7,200,000 were returned by different customers. Proper debit/credit notes were raised within the specified period. (iv) An amount of 820,000 on account of purchases made from a registered supplier is outstanding since July The related input tax was accounted for in the relevant tax period. (v) Sales tax credit brought forward from previous month amounted to 910,500. Sales tax is payable at the rate of 16%. All the above figures are exclusive of sales tax. Compute sales tax payable/refundable and input tax credit to be carried forward, if any. Solution: Mr. Folad Computation of sales tax liability Output tax: On local taxable supplies to registered persons U/S 3 12,387,900 On local taxable supplies to unregistered persons U/S 3 (Note 4) 1,674,500 On exports to Canada and USA [U/S 4 read with 5th Schedule] Less sales returns (1,224,000) 12,838,400 Input tax: On net local supples from registered persons (Note 2) less related to 7,351,347 fixed assets (9,119,832-1,768,485) On purchases from un- registered persons - Input tax b/f 910,500 (A) 8,261,847 90% of output tax (N - 1) (B) 11,554,560 Less: Admissible input tax Lower of (A) or (B) 8,261,847 Purchase of fixed asset related to local taxable supplies 1,768,485 ( 2,040,000 / 95,420,000 x 82,720,000) (N - 1) (C) 10,030,332 Balance sales tax payable [ Output tax - (C) ] 2,808, Conceptual Approach to Taxes

9 2% further sales tax payable on supplies to un-registered persons (N - 3) 197,000 Sales tax refundable related to export supplies (Note 3) (1,400,168) (N - 1) As the zero rated supplies are less than 50% of all taxable supplies under SRO 647(I)/2007 dated June 27, 2007, therefore 90% limitation is applicable U/S 8B of the Sales Tax Act, The said limitation is not applicable on input tax paid on acquistion of fixed assets. (N - 2) Apportionment of taxable supplies input tax [U/R 25 of Sales Tax Rules, 2006] Supplies Input tax Local supplies (gross) 82,720,000 9,119,832 Export sales 12,700,000 1,400,168 95,420,000 10,520,000 (N - 3) It has been assumed that 2% further tax u/s 3(1A) is applicable on local taxable supplies to unregistered persons under SRO 648(I)/2013 dated July 09, 2013 hence the same shall be accounted for and paid seperately without adjustment of the same against input tax / refund of the registered person and further it shall also not be considered for the computation of 90% limitation on output tax. Summer Q. 4(b) The following information relate to XYZ (Pvt) Ltd., for the month ended December 31, 2010: Taxable supply 5,000,000 Exempt supply 1,000,000 Zero-rated supply 2,000,000 Total supply 8,000,000 Purchase of raw materials used in taxable and zero-rated supply 4,500,000 Purchase of raw materials used in exempt supply 550,000 Compute the amount of sales tax liability / refund of the company. Solution: XYZ (Pvt) Ltd Computation of sales tax liability for the month ended December 31, 2015 Output tax: Input tax: On taxable supply U/S 3 ( 5,000,000 x 17%] 850,000 On exempt supply [U/S 6 read with 6th Schedule] - On zero rated supply [U/S 5 read with 5th Schedule] - 850,000 Purchase of raw materials used in taxable supplies (N - 2) 546,429 Purchase of raw materials used in exempt supply - (A) 546,429 90% of output tax (N - 1) (B) 765, ,429 Less: Admissible input tax lowe of (A) or (B) Balance sales tax liability 303,571 Sales tax refundable (Note 2) 218,571 (N - 1) As the zero rated supplies are less than 50% of all taxable supplies under SRO 647(I)/2007 dated June 27, 2007, therefore 90% limitation is applicable U/S 8B of the Sales Tax Act, Conceptual Approach to Taxes 699

10 (N - 2) Apportionment of taxable supplies input tax: [U/R 25 of the Sales Tax Rules, 2006] Supplies Input tax Local supplies (net) 5,000, ,429 Zero rated supplies 2,000, ,571 7,000, ,000 Winter Q. 5 Karsaz Limited is engaged simultaneously in manufacturing and supply of taxable as well as exempted goods. Summary of its transactions for the month of October is given below: Rupees Rupees Purchase of goods to be used for taxable supplies 600,000 Purchase of goods to be used for exempt supplies 900,000 Purchase of goods to be used for both taxable and exempt supplies 3,000,000 Total input tax on all purchases 675,000 Supply of wholly taxable goods 1,500,000 Supply of wholly exempt goods 1,800,000 Supply of partly taxable and partly exempted goods: Taxable supplies 3,750,000 Exempt supplies 750,000 Compute the sales tax liability of the company for the tax period. (Show proper workings) 4,500,000 Solution Karsaz Limited Computation of sales tax liability Output tax: Input tax: On supply of wholly taxable goods U/S 3 255,000 On supply of wholly exempt goods [U/S 6 read with 6th Schedule] - On supply of partly taxable and partly exempted goods Taxable supplies U/S 3 637,500 Exempt supplies [U/S 6 read with 6th Schedule] - 892,500 On purchase of goods to be used for taxable supplies (W-1) 90,000 On purchase of goods to be used for exempt supplies - On share of taxable supplies in purchase of goods for both 375,000 taxable and exempt supplies (W - 2) (A) 465,000 90% of output tax (N - 1) (B) 803,250 Less admissible input tax lower of (A) or (B) 465,000 Balance sales tax liability 427,500 Working: Total purchases (600, , ,000,000) 4,500,000 Total input tax on all purchases 675,000 W - 1: Tax on purchase of goods to be used for taxable supplies (675,000 / 4,500,000 x 600,000) 90, Conceptual Approach to Taxes

11 W - 2: Tax on purchase of goods for both taxable and exempt supplies (675,000 / 450,0000 x 3,000,000) 450,000 This input tax of 450,000 shall be allowed proportionately: (450,000 x 3,750,000 / (3,750, ,000) ) 375,000 (N - 1) As it is case of a manufacturer and none of the clause under SRO 647(I)/2007 dated June 27, 2007 is applicable therefore 90% of output tax limitation on input is applicable U/S 8B of the Sales Tax Act, Winter Q. 6 Mr. Fakhar Rizvi is a commercial importer of taxable goods. During the month of July, 2004 he imported goods valuing 1,500,000. On these imports he paid custom 10%, general 15% and income 6%. He also opted to pay Sales Tax on value addition at the time of imports. In addition to the above he provided following further information: 1. All imported goods were sold during the month of import i.e. July, There were no opening or closing inventories. 3. His actual rate of value addition was 14%. 4. GST paid on utility bills during the tax period amounted to 5,000. (i) Work out output tax, input tax and sales tax payable for the tax period of July, (ii) Also state: (A) who collects sales tax on imports and how? (B) Last date of filing of sales tax return in above case. Solution (i) Input tax: On assessed 17% 280,500 Additonal tax on value 3% paid at import stage 49,500 On utility bills paid (No entitlement to claim) - Total input tax 330,000 Output tax: Assessed value (N - 2) 1,650,000 14% value addition 231,000 Output 17% 1,881, , ,770 Excss sales tax paid [ Output tax - Input tax ] (See note below) (10,230) (N - 1) The importer is not entitled to claim refund on commercial imports sold at less than minimum value addition that is presently 18.75%. Provided that all the available stock in sold by registered person. (N - 2) Assessed value Import value 1,500,000 Custom 10% 150,000 Assessed value 1,650,000 (ii) (A) Conceptual Approach to Taxes 701

12 Who collects sales tax on imports and how? Sales tax on imports is collected by the Collector of 17% on assesed value and 3% additional tax of the same value as minimum value addition at the time of import clearance. (ii) (B) Last date of filing of sales tax return: Last date of filing of sales tax return is as no sales tax is payable by the registered person. Summer Q. 8 M/s Safi Electronics are engaged in manufacturing of electronic goods and are registered under Sales Tax Act, 1990 as Manufacturer-cum-Exporter. During the month of March, 2004 their Sales/Purchases data were recorded as under: (i) Local purchases: (a) From registered persons 4,500,000 (b) from un-registered persons 1,200,000 (ii) Imports 2,300,000 (iii) Utility bills, (exclusive of GST 75,000) 500,000 (iv) Sales to Registered Persons 3,200,000 (v) Sales to Un-registered persons 3,600,000 (vi) Exports 3,000,000 Notes: 1. All the above figures are exlusive of sales tax paid or recovered. 2. The owner also took goods worth 200,000 for his private use. 3. Purchases include an invoice of 100,000 dated: which was not included in the Sales Tax Return for February, 2004, due to it's late receipt. 4. Unadjusted imput tax carried forward from last month amounted to 45,000. (i) Calculate Sales Tax payable by M/s Safi Electronics for the month of March (ii) Give necessary explanations, on adjustments if any, to notes number 2, 3 and 4. Solution M/s Safi Electronics Computation of sales tax payable For the month of March 2016 Output tax: Input tax: On sales to registered persons ( 3,200,000 x 17%) 544,000 On sales to un-registered persons ( 3,600,000 x 17%) (Note 5) 612,000 Exports [U/S 5 read with 5th Schedule] - Goods taken for private use U/S 3 ( 200,000 x 17%) (Note 1) 34,000 1,190,000 On purchases from registered person ( 4,500,000 x 17%) 765,000 On purchases from un-registered persons - On imports used for manufacturing ( 2,300,000 x 17%) 391,000 On utility bills paid 75,000 Unclaimed invoice of last month ( 100,000 x 17%) (Note 2) 17,000 Unadjusted input tax of previous month (Note 3) 45,000 (A) 1,293,000 90% of output tax (N - 4) (B) 1,071,000 Sales tax payable [ Output tax - (lower of (A) or (B) ] 119, Conceptual Approach to Taxes

13 Sales tax credit c/f (A) less (B) 222,000 Explanations: (N - 1) Goods taken for private use are chargeable to sales 17%. (N - 2) Invoice not claimed in previous month can be claimed in six succeeding tax periods. (N - 3) Previous month carry forward shall be included in the input tax. (N - 4) As the zero rated supplies are less than 50% of all taxable supplies under SRO 647(I)/2007 dated June 27, 2007, therefore 90% limitation is applicable U/S 8B of the Sales Tax Act, (N - 5) It has been assumed that 2% further tax u/s 3(1A) is not applicable on local taxable supplies to unregistered persons under SRO 648(I)/2013 dated July 09, 2013 otherwise further tax shall be accounted for and paid seperately without adjustment of the same against input tax / refund of the registered person and further it shall also not be considered for the computation of 90% limitation on output tax. Conceptual Approach to Taxes 703

14 704 Conceptual Approach to Taxes