Sales Tax is an indirect tax that is imposed on the sale of goods and services within Pakistan. The Federal Board of Revenue (FBR) is responsible for the collection of Sales Tax in the country. If you are a business owner in Pakistan, it is important to understand whether you need to register for Sales Tax and what the registration process entails.
Who Needs to Register for Sales Tax?
The Sales Tax Act 1990 outlines the following persons who are required to register for Sales Tax in Pakistan:
Every person making taxable supplies locally is:
- A manufacturer
- Tier I retailers
- An importer
- An exporter (who intends to seek a refund against zero-rated supplies)
- A wholesaler, dealer or distributor
- Any person who is required under any provincial or Federal law to be registered for Sales Tax
If you fall under any of the above categories, you are required to register for Sales Tax. Even if you do not meet any of the above criteria, you can still voluntarily register for Sales Tax. In fact, voluntary registration can bring several benefits to your business, such as becoming a more attractive supplier to larger businesses who only deal with registered suppliers.
How to Register for Sales Tax?
The process of registering for Sales Tax is relatively straightforward. Here is a step-by-step guide:
Step 1: Obtain a National Tax Number (NTN)
The first step in the registration process is to obtain a National Tax Number (NTN). You can obtain an NTN by applying online through the FBR’s online portal or by visiting the nearest Regional Tax Office (RTO) or Large Taxpayers Unit (LTU).
Step 2: Register for Sales Tax
Once you have obtained your NTN, you can apply for Sales Tax registration. You can do this by completing the Sales Tax registration form and submitting it to the relevant RTO or LTU. You will also need to provide supporting documents, such as your company’s registration documents and bank statements.
Step 3: Fill in Balance Sheet for the Business
As per new FBR requirements businesses shall enter Balance sheet at time of Registeration. Monthly Sales can be reported up to 5 times of working Capital. Make sure to know the capacity of business estimates. For sales more than 5 times Commissioner Approval will be required for sales tax submission.
Info required for Balance sheet is:
Total Equity & Liabilities
Capital
Long term Borrowings
Creditors/Other liabilities
Total Assets
Fixed Assets
Inventory/Stock
Bank /Cash Balance
Any other asset
Step 4: Receive Your Sales Tax Registration Certificate
After submitting your application, the FBR will review your application and supporting documents. If everything is in order, you will receive your Sales Tax Registration Certificate within 15 working days.
What Are the Consequences of Not Registering for Sales Tax?
If you are required to register for Sales Tax but fail to do so, you can face several consequences. The FBR can impose penalties and fines on non-compliant businesses, and you may also be subject to legal action. Additionally, non-compliant businesses may face difficulties in securing contracts with larger businesses that only deal with registered suppliers.
Conclusion
If you are a business owner in Pakistan, it is important to understand whether you need to register for Sales Tax and how to do so. By registering for Sales Tax, you can avoid legal issues and penalties, and you can also become a more attractive supplier to larger businesses. If you are unsure about whether you need to register for Sales Tax, you should consult with a tax professional or contact the FBR for guidance.
