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Cross adjustment of ST: Draft MoU between FBR, SRB ready

Cross adjustment of ST: Draft MoU between FBR, SRB ready

ISLAMABAD: The Federal Board of Revenue (FBR) and Sindh Revenue Board (SRB) have agreed that any person making supplies of taxable goods under the Sales Tax Act, 1990 will be allowed to adjust sales tax paid on taxable services received by him during business from a person working under Sindh Sales Tax on Services Act, 2011.

According to draft of the proposed memorandum of understanding (MoU) to be signed by the FBR and SRB, it has been decided to allow taxpayers working under each of these laws to cross adjust sales tax paid on their inputs purchased/received from taxpayers working under the other law, from the sales tax payable on their supplies/services in accordance with the conditions specified in the law.

It is to be noted that the MoU aims at facilitating cross adjustment of Sales Tax on goods and services levied by the Federal and Provincial Governments respectively.

The MoU reads that a person working under the Sales Tax Act, 1990 and making supplies of taxable goods shall be allowed to adjust the sales tax paid by him on taxable services received by him in the course of business from a person working under the Sindh Sales Tax on Services Act, 2011. Conversely, a service-provider working under the Sindh Sales Tax on Services Act, 2011 shall be entitled to adjust the sales tax paid by him on taxable goods purchased by him in the course of business from a person working under the Sales Tax Act, 1990. All such adjustments shall, of course, be subject to the relevant conditions and procedure laid down in the respective laws.

The draft MoU adds that the FBR and the SRB shall make payment to the other entity wherever overpayment has been made. In case one entity fails to make this payment within 15 days from the date of sending of the Joint Committee’s Report to the Finance Division, the case shall be referred to the Finance Division, as an Adjuster, to make at source adjustments.