Non-mentioning of buyer's CNIC: FBR expands scope of disallowance of input tax

ISLAMABAD: The Federal Board of Revenue (FBR) has expanded the scope of disallowance of input tax on account of non-mentioning of the Computerized National Identity Card Number (CNIC) of the buyer by the seller on the invoice required under section 23 of the Sales Tax Act 1990.

According to the circular number 1 of 2020 issued by the FBR Thursday, the word "services" has been added along with goods in the Sales Tax Act to enlarge the scope of disallowance of input tax on account of non-mentioning of CNIC of the buyer by the seller on the invoice as required under section 23 of the 1990 Act. Resultantly, input tax claimed against goods as well as services shall be disallowed on pro rata basis if supplies have been made to persons without obtaining their CNIC/NTN subject to the conditions mentioned in the law. The measure is expected to optimally broaden the sales tax base.

Through the Finance Act 2019, section 23 was amended by inserting the condition of mentioning of NIC of the unregistered purchaser on the invoice. The measure was introduced to broaden the income as well as sales tax base. However, in case of supplies by a retailer to end consumers, the requirement was applicable if the transaction value exceeded Rs. 50,000. Many representations were received stating that the retailers are facing hardship in obtaining CNIC of the buyers/customers. Hence, amendment in section 23 has been made for enhancing the threshold from Rs.50,000 to Rs 100,000. Now, it would not be compulsory for the retailers to mention NIC of buyer if transaction value does not exceed Rs. 100,000 where supply is made to an ordinary consumer under Finance Act 2020.

The FBR added that the value of supply in the case of Independent Power Producers (IPPs) has been defined as not to include "capacity purchase price." Initially this concept was embodied in the Special Procedure Rules 2007 and was transposed into the main statute through the Finance Act, 2019, when the expression "Wapda" was left out during this transposition. It needed a change so that the concept of value of supply in case of electricity supply by Wapda may also be aligned with the same applicable to other players in the sector. Now, value of supply of electricity in case of Wapda shall not include "Capacity Purchase Price", however, the change being of substantive nature shall be effective from 1-7-2019.

Copyright Business Recorder, 2020