How to Select Reduced Rate of Tax in KPRA?

1. Opting for Standard Rate:
   • Businesses offering services taxed at reduced rates can choose to apply the standard rate with approval from the Management Committee.
   • Permissions include specific conditions, effective dates, and restrictions as set by the committee.
   • Companies can notify their intention to switch to the standard rate at least one month in advance but require prior approval to revert back.
2. Switching Back to Reduced Rate:
   • Registered persons cannot independently revert to reduced tax rates without approval.
   • The Management Committee may conduct inquiries or audits before granting approval.
3. Input Tax Adjustments:
   • Unused input tax credits accrued under the standard rate cannot be applied retroactively after switching to reduced rates.
4. Withdrawal of Permissions:
   • The Management Committee may revoke granted permissions with due process, including a show-cause notice and an opportunity for a hearing.

Restrictions on Input Tax Adjustments

1. General Restrictions:
   • Input tax cannot be claimed for goods or services not directly used in taxable services.
   • Claims are disallowed if taxes are not deposited by the supplier or if transactions exceed PKR 50,000 and are not paid via a proper banking channel.
   • Fake or fraudulent invoices, or those from blacklisted suppliers, are not admissible.
2. Specific Exclusions: Input tax adjustments are prohibited for:
   • Certain goods like vehicles, office equipment, building materials, and utilities used for non-business purposes.
   • Services used in exempt or reduced-rate services.
   • Transactions not routed through official business bank accounts.
3. Mixed Services:
   • For businesses dealing with both taxable and non-taxable services, input tax claims are proportionally restricted to the taxable services.
4. Special Cases:
   • Adjustments are not allowed for input taxes on reduced-rate goods or services used in providing standard-rated taxable services.
   • Goods or services acquired more than six months before the provision of taxable services cannot have their input taxes claimed.
5. Notification-Based Inadmissibility:
   • The Management Committee can notify additional goods or services that are ineligible for input tax claims.
6. Prohibitions for Non-Registered Persons:
   • Only registered persons can claim input tax adjustments on goods or services used for taxable services.