Tax

Sales Tax on Goods

Sales tax on the supply of goods — registration, records, returns, and the reconciliations that follow when the system, the invoice and the return all have to say the same thing.

Manufacturers
Importers
Distributors
Retail chains
Wholesalers

What we are usually called about

The questions this work arrives with

None of these is unusual and none of them is a failing. They are what happens when a business grows faster than the records, the systems and the filings that describe it.

The system decides what the return says

The figures are settled from the same data the ERP and the point of sale produce. A great many disputes begin as a configuration decision rather than as a tax decision.

Input tax that cannot be supported

Supplier invoices that do not match the purchase record, credit notes raised outside the system, and buying done against no order at all. Each is either recoverable tax nobody claimed or a position that is hard to defend.

Classification of what is supplied

The treatment of an item follows from how it is classified, and the same item can often be argued into more than one heading. A view taken once applies to every invoice issued since.

Registration and records

Whether registration is required, what records have to be kept, and where they are kept when three systems each hold part of the answer.

Notices, audits and reconciliations

Answering a notice usually means reconciling the return to the ledger and the ledger to the system, in that order, before anything is written.

How the work runs

What an engagement looks like

Scope and fees are agreed in advance and in writing, before any of this starts. Where a step turns out not to be needed, it is dropped rather than billed.

01
Position review

Establishing what is supplied, how it is recorded, what has been filed so far, and where the gaps are.
02
Reconciliation

Return to ledger, ledger to system, with the differences explained rather than adjusted away.
03
Written position

Where a treatment is uncertain, a written analysis of the options and the basis for the one recommended.
04
Filing and compliance

Preparing or reviewing periodic returns from the underlying records rather than from a summary of them.
05
Representation

Replying to notices and dealing with the authority on the file, on the record.

Scope

What an engagement can cover

A list of what the work can include, not a package. What is actually needed is settled after the first conversation and written into the engagement letter.

Registration and de-registration support
Review of how supplies are recorded in the ERP or point-of-sale system
Preparation or review of periodic returns
Input tax reviews and reconciliation to the purchase ledger
Written analysis of classification questions
Correspondence, notices and audit representation

In practice

When businesses actually call

Most of this work starts on a particular day, for a particular reason. If one of these is roughly where you are, it is usually cheaper to look at it before the position hardens than afterwards.

A first registration, or one that is overdue

A business that has grown past the point where registration was still an open question, and needs to know what registering now means for the supplies it has already made and the records it already holds.

A notice or an audit with a date on it

Something has arrived from the department and it has to be answered. The first work is reconciling the return to the ledger and the ledger to the system, so that whatever is eventually written can be supported line by line.

A system going live, or being reconfigured

An ERP or point-of-sale project where how a supply is recorded decides what the return will later say. Far easier to settle while it is still a configuration question than to unpick across a year of invoices.

A product line nobody is sure how to treat

A new item, a repackaged one, or an existing one somebody has quietly begun classifying differently. A view taken once applies to every invoice raised since, which is why it is worth writing down rather than assuming.

Input tax that will not reconcile

A gap between what the purchase ledger says and what can actually be supported, found either at year end or halfway through answering something from the department.

Diligence, a sale, or a new investor

Somebody outside the business is about to examine its tax position in detail. That position is better prepared than discovered.

Federal or provincial

Goods or services — the line between the two regimes

Sales tax on goods is a federal matter, administered by the Federal Board of Revenue. Sales tax on services is not: each province administers its own services regime, under its own law and its own authority. The practical consequence is that a transaction has to sit on one side of that line, and both sides have an interest in where it sits.

Province is not the whole of it. Services supplied in the Islamabad Capital Territory are taxed under a separate federal ordinance dealing with services, administered by the Federal Board of Revenue. It is federal, but it is not the federal law that taxes goods, and a service does not become a good because the authority collecting the tax happens to be a federal one.

Composite arrangements are where it gets decided: equipment supplied with installation, software supplied with configuration, goods delivered under a contract that also carries a service. How the contract is written and how the invoice is raised usually settle the answer before anybody thinks to ask the question.

Being wrong in either direction has a cost — tax accounted for to one authority and then demanded by the other, or input tax claimed against the wrong regime. Because this practice advises on both sides of the line, the question can be looked at once rather than twice.

No rate, threshold or filing date is given here. Those change, and a position on a specific transaction needs the current law and the contract itself in front of it.

Who this is for

Where this work usually comes from

Most of this work arrives from one of two sectors. Neither is a requirement — the sectors are where the practice already knows the vocabulary, not a list of who it will act for.

Retail

Chains running an ERP and a point of sale, where stock, margin and every invoice are now reported in real time.

Pharmaceutical

Manufacture and distribution sold through a trade that settles half its margin outside the invoice — in bonus stock, credit terms, discounts and credit notes.

Both are set out in full on the sectors page — what each one is usually called about, and what the practice does across the two.

Alongside this

One practice handles all of it, so nobody is coordinating between a systems consultant, a tax adviser and a bookkeeper.

Tax

Sales Tax on Services

Provincial — all four provinces

Tax

Income Tax

Returns, notices, audits and appeals

Systems & Assurance

ERP Advisory

Selection, implementation and migration

Check your filing dates

Answer a few questions about the business and see which FBR filing and payment dates apply to it, with the legal basis and official source for each one.

Open the compliance calendar — Check your filing dates

Insights