Sales Tax and Federal Excise Duty: Charge, Credits, Returns, Refunds, POS and FED
This domain tests the Sales Tax Act 1990 and the Federal Excise Act 2005 as applied at import and in the domestic chain: when tax is charged, how input credit is claimed, how returns and refunds are processed, and how point-of-sale integration and FED obligations work.
Charge and credit
- Sales tax is charged on the value of taxable supplies and on imports; the standard rate is 18%, with zero-rating for exports and listed reduced or exempt items.
- Input tax credit is available only against a valid tax invoice from a registered supplier, for goods used in taxable supplies, within the limitation period.
- Registered persons file monthly returns by the 18th of the following month; FED returns are due by the 15th.
Worked example
A registered manufacturer buys inputs for Rs 1,000,000 plus sales tax Rs 180,000 and sells output for Rs 1,200,000 plus Rs 216,000 tax. Output minus input = Rs 36,000 payable. If the input invoice came from an unregistered supplier, credit is disallowed and the full Rs 216,000 is payable - with the disallowed amount treated as a cost.
Refunds and POS
Refunds arise from zero-rated exports and excess input; the claim is filed with the return, verified, and processed within the statutory period, with powers to sanction or reject after scrutiny. Tier-1 retailers must integrate their invoicing with the FBR POS system so that each sale generates a verifiable invoice and the buyer can confirm it.
FED
FED is charged on the goods and services in the First Schedule of the Federal Excise Act 2005 - for example cement, beverages, tobacco, petroleum products, natural gas, and services such as telecom and air travel - at specific or percentage rates, under a separate registration and return.
Traps
Claiming credit without a valid invoice; netting FED against sales tax; missing the 18th/15th deadlines; and assuming zero-rating is the same as exemption (zero-rated supplies allow credit; exempt supplies break the chain).