CHAPTER 18

DETERMINATION OF SALES TAX LIABILITY

 The liability of a registered person in respect of taxable supplies made by him during the tax
period shall be the difference between
(i) Output tax due from him in respect of taxable supplies made during a tax period; and
(ii) Input tax paid (on cash purchases) or payable (on credit purchases) during the said tax
period for the purpose of taxable supplies made (sold) or to be made (unsold) by him
excluding the amount of further tax; and
 Where a registered person did not deduct input tax within the relevant period(e.g forget to
record purchase, invoice received late or invoice received but misplaced), he may claim such
tax in the return for any of the six succeeding tax periods. (e.g if goods are sold on January 14,
2024, the tax period will be January and six succeeding tax period he may claim till July 2024)
 Credit for input tax paid on purchases which are not paid for as per the provisions of section 73,
shall not be allowed
 Deduction of Input Tax from the output tax payable by a registered person shall be allowed if:
(i) In case of a claim for input tax in respect of a taxable supply received, he holds a tax invoice
in his name and bearing his registration number in respect of such supply for which a return
is furnished or in case of supply of electricity or gas, a bill bearing his registration number and
the address where the connection is installed;
(ii) In case of goods imported into Pakistan, he holds bill of entry or goods declaration in his
name and showing his sales tax registration number, duly cleared by the customs
Authorities; and
(iii) In case of goods purchased in auction, he holds a treasury challan bearing his name and his
registration number showing payment of Sales Tax.
Determination of Tax liability:
Output tax (250 units sold @ Rs. 500 )x18% 22,500
Less: Input tax (320 units purchased @Rs. 300 )x 18% (17,280)
5,220
From the 320 units purchased, 250 units have been sold and remaining 70 units are to be
sold. If purchases is on cash then input tax is paid and if purchases are on credit then input tax
is payable

Certain Transactions and Input Tax Related thereto that is Inadmissible (Sec 73)
1) Payment > 50,000 (other than utilities) must be through banking channel. (if purchases above
50,000 are paid in cash no input tax will be allowed)
2) Payment must be made from business bank account of buyer to business bank account of the
supplier. Bank account of both buyer and supplier should be declared to Board at the time of
registration/through change of particulars subsequently.
3) Payment must be made within 180 days of issuance of tax invoice in case of credit transactions.
Adjustments made by a registered person in respect of amounts payable and receivable to and from
the same party shall be treated as payments satisfying the provisions of this section subject to the
conditions that sales tax has been charged and paid by both parties, wherever applicable and the
registered person has sought prior approval of the Commissioner before making such adjustments
If any of the above conditions are not fulfilled, then:
(a) Buyer will not be entitled to claim input tax/refund/zero rating.
(b) Supplier will not be entitled to claim input tax/refund/zero rating/ if amount not received in bank
account.
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Note 1: Input tax should be reversed in the month after lapse of 180 days.
Note 2: Sec 73 not applicable on registered person supplying goods to unregistered person. However,
supplier should deposit cash in his business bank account to claim input tax
Restriction on input on supplies to unregistered persons (Sec 73(4), Sec 23, Sec 8)
1) A register person shall make all taxable supplies to a person who has obtained sales tax registration
number. However, supplies upto:
 Rs. 10 million per person per month
 Rs.100 million per person in a financial year
can be made to unregistered persons.
2) In case of non-compliance the supplier shall not be entitled to claim input tax attributable to such
excess supplies to unregistered persons.
3) Further FBR has clarified that above provisions shall not apply to supplies made to:
 Federal/provincial/local Government departments, authorities, etc. not engaged in making of
taxable supplies’
 Foreign Missions, diplomats and privileged persons.
 Registered persons engaged in manufacturing and supply of fertilizer upon submission of
required documents.
 All other persons not engaged in supply of taxable goods.
4) Any tax invoice issued shall bear the CNIC/NTN number in case supplies are made by manufacturer
or importer to unregistered distributor. In case of non-compliance input tax attributable to supplies
made to unregistered distributor on pro-rata basis is disallowed. Similarly, expense will be disallowed
proportionate to total turnover in income tax.
Change in the Rate of Tax [Sec 5]
If there is a change in the rate, tax shall be applicable as under:
(i) A taxable supply made by a registered person shall be charged to tax at such rate which is in
force at the time of making supply (at the time of sale)
(ii) Imported goods shall be charged to tax at such rate as is in force:
(a) in case the goods are entered for home consumption, on the date on which a goods
declaration (a detail on a page declaring the details of goods imported) is presented and
(b) in case the goods are cleared from warehouse, on the date on which a goods
declaration for clearance of such goods is presented.
(iii) Where goods declaration is presented in advance of the arrival of the conveyance by which the
goods are imported, the tax shall be charged at the rate as is in force on the date on which the
manifest (evident) of the conveyance is delivered.
(iv) If the tax is not paid within seven days of the presenting of the goods declaration, the tax shall
be charged at the rate as is in force on the date on which tax is actually paid.
(v) If there is a change in the rate of tax during a tax period a separate return has to be furnished
in respect of each portion of the tax period showing the application of different rates.
For example: If goods declaration is presented on 10 January 2024. Manifest of conveyance is
delivered on 23 January 2024. The rates of January 24 are applicable.

Exercise: Rate of sales tax has increased from 17% to 18% effective from 23 May 2023. The accountant
of the company is unsure about the manner in which sales tax return for the month of May 2023
would need to be furnished.
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Answer
If there is a change in the rate of tax during a tax period, a separate return in respect of each portion of
the tax period has to be furnished showing the application of the different rates of tax.
Therefore, company will furnish two returns:
2 May 2023 with 17% rate; and
May 2023 to 31 May 2023 with 18% rate
Alternatively only one sales tax return may filed if the single return will provide facility to incorporate
both the sales tax rates as stated above
TIME AND MANNER OF PAYMENT [SEC 6]
Time of Payment
Time for payment of tax on goods imported:
Tax on goods imported into Pakistan shall be charged and paid in the same manner and at the same
time as if it were a duty of customs payable under the Customs Act, 1969.
Time for payment of tax on taxable supplies:
Tax on taxable supplies made during a tax period shall be paid by the registered person at the time of
filing the return.
Mode of Payment
The tax due on goods imported or taxable supplies shall be paid in any of the following manners:
(i) Tax on goods imported shall be paid in the manner as if it were a duty of customs payable
under the Custom Act, 1969
(ii) The tax due on taxable supplies shall be paid by any of the following modes, namely
(a) through deposit in a bank designated by the Board; and
(b) through such other mode and manner as may be specified by the Board
The Federal Government may, subject to such conditions, limitations and restrictions as it may impose,
by notification in the official Gazette, allow payment of sales tax on installments basis by Federal or
Provincial Governments or any public sector organization on import or supply of goods or class of
goods. Moreover, such payment may be allowed from any previous date
OUTPUT TAX
Output tax is defined in section 2(20) in the following manner
Definition
In relation to a registered person, means-
(i) tax levied under this Act on a supply of goods, made by the person;
(ii) tax levied under the Federal Excise Act, 2005 in sales tax mode as a duty of excise on the
manufacture or production of the goods, or the rendering or providing of the services, by the person;
(iii) provincial sales tax levied on services rendered or provided by the person;
(iv) sales tax levied on the services rendered or provided by the person under Islamabad Capital
Territory (Tax on Services) Ordinance, 2001 (XLII of 2001);]
Adjustment of Debit and Credit Notes
These notes can be issued where a registered person has issued a tax invoice in respect of a supply
made by him, however, due to the following circumstances, the said invoice may desire amendments:

 Cancellation of supply or
 Return of goods or
 A change in the nature of supply or
 Change in the value of the supply or
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  Some such event the amount shown in the tax invoice or
 Return needs to be modified
Applicability (Rule 19)
The above adjustment can only be made where a registered person has issued a tax invoice in respect
of a supply made by him and as a result of the issuance of debit / credit note; the amount shown in the
tax invoice or the return needs to be modified
Cancellation or Return of Supply (Rule 20)
In case a registered person has made a supply, and such supply or part thereof is cancelled or
returned, the buyer or the recipient shall issue a debit note (in duplicate) in respect of such supply or
part thereof, indicating the quantity being returned or the supply of which has been cancelled, its
value determined on the basis of the value of supply as shown in the tax invoice issued by the supplier
and the amount of related sales tax paid thereon, as well as the following, namely:-
i. name and registration number of the recipient;
ii. name and registration number of the supplier;
iii. number and date of the original sales tax invoice;
iv. the reason of issuance of the debit note; and
v. signature and seal of the authorized person issuing the note
The original copy of the debit note shall be sent to the supplier and the duplicate copy shall be
retained for record.
In the case of cancellation of supplies made to, or return of goods by, an unregistered person, the
supplier shall issue a credit note providing the same particulars as are specified above and keep a copy
for record.
Change in Value of Supply or Amount of Sales Tax (Rule 21)
Where for any valid reason the value of supply or the amount of sales tax mentioned in the invoice
issued has increased, the supplier shall issue a debit note (in duplicate), with the following particulars,
namely:-
 name and registration number of the supplier;
 name and registration number of the recipient;
 number and date of the original sales tax invoice;
 original value and sales tax as in original invoice;
 the revised value and sales tax;
 the difference of value and sales tax adjustable;
 the reason for revision of value; and
 signature and seal of the authorized person issuing the note.
Where, for any valid reason, the value of supply or the amount of sales tax mentioned in the invoice
issued has decreased, the supplier shall issue a credit note (in duplicate), with the same particulars as
specified above. The original copy of the note shall be sent to the recipient and the duplicate shall be
retained for record.
Adjustment of Input and Output Tax (Rule 22)
 The buyer shall not be entitled to claim input tax in respect of the supply which has been
cancelled or returned to the supplier (seller) or in respect of which the amount of tax was
reduced.

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  Where the buyer has already claimed input tax credit in respect of such supplies, he shall
reduce or increase the amount of input tax by the corresponding amount as mentioned in the
Debit Note or Credit Note, as the case may be, in the return for the period in which the
respective note was issued.
 Where the supplier has already accounted for the output tax in the sales tax return for the
supplies against which Debit Note was issued subsequently, he may increase or reduce the
amount of output tax by the corresponding amount as mentioned in the Debit Note, in the
return for the period in which the respective note was issued.
 Provided that in case of return of supplies by an unregistered person, the adjustment as
aforesaid can be made against the Credit Note issued by the supplier.
 The adjustments as herein before noted which lead to reduction in output tax or increase in
input tax can only be made if the corresponding Debit Note or Credit Note is issued within one
hundred and eighty days of the relevant supply
 Provided that the Collector may, at the request of the supplier, in specific cases, by giving
reasons in writing, extend the period of one hundred and eighty days by a further one hundred
and eighty days.
 Where the goods relating to a returned or cancelled supply are subsequently supplied to the
original buyer or some other person with or without carrying out any repairs, the supplier shall
charge sales tax thereon in the normal manner and account for it in his return for the period in
which these goods were supplied.
Destruction of Goods (Rule 23)
Where any goods are returned by the buyer on the ground that the same are unfit for consumption
and are required to be destroyed by the supplier, the goods shall be destroyed after obtaining
permission from the Collector of sales tax having jurisdiction, and under the supervision of an inland
revenue officer of sales tax not below the rank of an Assistant Collector as may be deputed by the
Collector for the purpose and the input tax credit in respect of goods so destroyed shall not be
admissible.
Exercise: Following are results of Nadeem Associates for preparation of sales tax return for the, month of June,
2024
Supplies 75,000,000
Purchases 55,000,000
Sales tax on utilities bills of factory 500,000
Sales returns of April 2024 6,500,000
Purchases returns of May 2024 1,200,000
Required: Compute sales tax liability of Nadeem Associates

Solution:
68,500,000 (i.e. 75,000,000 - 6,500,000) x
Output tax on supplies 12,330,000
18%
53,800,000 (55,000,000 – 1,200,000)x18%
Less: input tax (9,684,000)
Less: sales tax on utilities (500,000)
Net sales tax payable 2,146,000

INPUT TAX
Definition: Input Tax [2(14)]
In relation to a registered person, means;
 tax levied under this Act on supply of goods to the person (means buyer);

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  tax levied under this Act on the import of goods by the person (means importer);
 in relation to goods or services acquired by the person(buyer), tax levied under the Federal
Excise Act, 2005 in sales tax mode as a duty of excise on the manufacture or production of the
goods, or the rendering or providing of the services;
 Provincial Sales Tax levied on services rendered or provided to the person (buyer); and
 levied under the Sales Tax Act, 1990 as adapted in the State of Azad Jammu and Kashmir, on
the supply of goods received by the person
Time of Claim of Input Tax:
A registered person shall not be entitled to deduct input tax from outputtax unless:
 in case of a claim for input tax in respect of a taxable supply made in Pakistan, he
holds a tax invoice in his name and bearing his registration number in respect of
such supply for which a return is furnished;
 in case of goods imported into Pakistan, he holds the goods declaration duly cleared
by thecustoms authorities;
 in case of goods purchased in auction, he holds a treasury challan in his name and
bearinghis registration number;
 the supplier declares the supplies in his return or pays the due tax as shown in this
return.
Input Tax Not Admissible [Sec 8]
A registered person shall not be entitled to deduct input tax paid on:
(i) The goods or services which are not used or not to be used for the manufacture or production of
taxable goods or for taxable supplies made or to be made by him (for exempt goods)[e.g sales of
cottage industry are exempt so if any input tax paid by cottage industry on its purchases, is not
allowed as deduction];
(ii)The goods on which extra amount of tax is payable under sub-section (5) of section 3(the extra tax is
not allowed as input deduction);
(iii) Any other goods or services which the Board with the approval of the Federal Government may by
a notification in the official Gazette specify;
(iv) The goods or services in respect of which sales tax has not been deposited in the Government
treasury by the respective supplier;
(v) Fake invoices;
(vi) purchases made by a registered person in case he fails to provide information relating to his
imports, purchases, sales etc. as required by the Board through a notification u/s 26(5);
(vii) Purchases in respect of which a discrepancy is indicated by CREST(Computerized Risk-based
Evaluation of Sales Tax) or input tax of which is not verifiable in the supply chain;
(viii) Goods and services not related to the taxable supplies made by the registered person;
(ix) Goods and services acquired for personal (domestic use) or non-business (donation)consumption;
(x) Goods used in, or permanently attached (like paint on walls) to, immoveable property (e.g
building), such as building and construction materials, paints, electrical and sanitary fittings, pipes,
wires and cables, but excluding pre-fabricated buildings and such goods acquired for sale or re-sale or
for direct use in the production or manufacture of taxable goods;
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(xi) Vehicles falling in the First Schedule to the Customs Act, 1969, parts of such vehicles, electrical and
gas appliances, furniture furnishings, office equipment (excluding electronic cash registers), but
excluding such goods acquired for sale or re-sale;
(xii) Services in respect of which input tax adjustment is barred under the respective provincial sales
tax law;
(xiii) Import or purchase of agricultural machinery or equipment subject to sales tax at the rate of 7%
under Eighth Schedule to this Act; and
(xiv) From the date to be notified by the Board, such goods and services which, at the time of filing of
return by the buyer, have not been declared by the supplier in his return or he has not paid amount of
tax due as indicated in his return.
(xv) Import of scrap of compressors.
(xvi) The input goods or services attributable to supplies made by manufacturer or importer to
unregistered distributor, on pro-rata basis, for which sale invoices do not bear the NIC number or NTN,
as the case may be, of the recipient as stipulated in section 23

If a person deals in taxable and non-taxable supplies, he can reclaim only such portion of input tax as
is attributable to taxable supplies computed in the following manner:
Residual input tax Value of taxable supplies
X Residual input tax
credit on taxable Value of taxable + exempt supplies
supplies tax

Exercise
Omega Enterprises has submitted the following data for the month of July 2023.
Rupees
Total Sales registered 6,000,000
Export Sales 2,500,000
Exempt Supplies 500,000
Gross Purchases from Registered suppliers 6,500,000
Gross Purchases from Unregistered suppliers 500,000
Purchase Return to Registered suppliers 650,000

Required:
You are required to compute the sales tax liability of Omega Enterprises for the month of July 2023. For
the sake of simplicity ignore the 90% adjustment of input tax against output tax rule as mentioned in
section 8B.
Solution:
Output tax Rs.
Total sales Rs. 6,000,000 x 18% 1,080,000
Export sales Rs. 2,500,000 x 0% -
Exempt supplies -
1,080,000

Input tax (w-1) (702,000)

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 Balance payable 378,000
input refundable pertaining to zero rated supplies (292,500)

Working:
W-1:
Apportionment of input tax, as per apportionment of input tax rules, 2006
Value of taxable supply 6,000,000
Zero rated supplies 2,500,000
Exempt supplies 500,000
9,000,000

Residual input (Rs.6,500,000-650,000) x 18% 1,053,000

Input pertaining to zero rated (Rs.1,053,000x
(292,500)
2,500,000/9,000,000)

Input pertaining to exempt (Rs. 1,053,000 x (58,500)

500,000/9,000,000)
Input admissible 702,000

 Monthly adjustment of input tax claimed by a registered person shall be treated as provisional
adjustment and at the end of each financial year, the registered person shall make final
adjustment on the basis of taxable and exempt supplies made during the course of that year
 Deduction of input tax from output tax shall not be allowed to a person who is not registered
under Sale Tax Act
Certain Transactions and Input Tax Related thereto that is Inadmissible [Sec 73]
Where the sum received is partly in cash and partly in kind, and then the same transaction
would beallowed subject to the conditions:
 Goods received in kind represent taxable goods
 Goods received are reflected in records.
 The balance amount even less than Rs 50,000 is received through crossed banking
instrument.
If the banking instrument is issued but the same is not encashed or deposited within 180 days then the
input tax shall not be denied. However, it must be ensured that the amount is ultimately deposited in
the seller account and the said instrument is not cancelled.
Adjustable Input Tax [Sec 8B]
Section 8B of the Sales Tax Act, 1990 states that:
 A registered person shall not be allowed to adjust input tax in excess of 90% of the output tax
for that tax period.
 Restriction on the adjustment of input tax in excess of 90% of the output tax shall not apply
in case of fixed assets or capital goods. However, the Board may, by notification in the official
Gazette, exclude any person or class of persons from the purview of this para.
 A registered person may be allowed adjustment or refund of input tax not allowed as per the

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 above provisions subject to the following conditions
(i) In the case of registered persons, whose accounts are subject to audit under the
Companies Act, 2017, upon furnishing a statement along with annual audited
accounts, duly certified by the auditors, showing value additions less than the
limit prescribed above; or
(ii) In case of other registered persons, subject to the conditions and restrictions as
maybe specified by the Board by notification in the official Gazette.
 The adjustment or refund of input tax if any, shall be made on yearly basis in the second
month following the end of the financial year of the registered person.
 The Board may, by notification in the official Gazette, prescribe any other limit of input tax
adjustment for any person or class of persons.
 Any auditor found guilty of misconduct in furnishing the certificate mentioned above shall
be referred to the Council for disciplinary action under section 20D of Chartered
Accountants, Ordinance, 1961.
 Notwithstanding anything contained in sub-sections (1), (2) and (3), input tax allowed in case
of locally manufactured electric vehicles subject to reduced rate of tax under the Eighth
Schedule shall be limited to the extent of amount of output tax and no refund or carry
forward of excess input tax shall be allowed.[e.g if manufacturer of electric vehicle has
output tax of Rs. 20 million and input tax of Rs. 34 million he will be allowed an input tax of
Rs. 20 million to the extent of its output tax]
 In case a Tier-1 retailer does not integrate his retail outlet in the manner as prescribed during a
tax period or part thereof (few days of the month), the adjustable input tax for whole of that
tax period shall be reduced by 60%.[only 40% of input tax is allowed as deduction. Total input
x40%]

Exercise
In the light of the provisions of Sales Tax Act, 1990 explain as to the chargeability/adjustment of sales
tax in respect of each of the following independent situations
(i) Sales tax of Rs. 100,000 was paid along with the electricity bill paid in cash during February
2023. The bill pertained to the manufacture of 50% of goods exported to the UAE and 50% of
the goods which are exempt from sales tax.
(ii) Free replacement of defective parts is made in the case of taxable goods, which have been sold
under warranty. During the month of May 2023 the market value of such replacement parts
was Rs. 500,000
(iii) ABC Manufacturing Limited purchased raw material amounting to Rs. 100 million on credit. The
payment was made after 240 days of the issuance of tax invoice by way of crossed cheque
drawn on the business bank account of the supplier.
(iv) Destruction of damaged goods.
(v) Purchase of taxable goods from a person who has reputation of evading sales tax.
(vi) Payment of fuel to be used for machinery by the Director of the company using his own credit
card.

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 Answer
(i) Sales tax paid on electricity bills
Sales tax paid along with an electricity bill is an admissible input tax only when the electricity was used
to produce taxable goods. Further, in the case of utility bills, payment in cash does not disentitle a
claim of input tax paid thereon. Therefore, input tax of Rs. 50,000 would be admissible, whereas,
balance sales tax of Rs. 50,000 paid in respect of exempt supplies would not be allowed as input.
(ii) Free replacement of defective parts
The free replacement of defective parts (open market value of Rs. 500,000) during the warranty
period is considered as equivalent to the value of the original supply and not a separate supply. Such
replacement is not chargeable to tax.
(iii) Payment after 240 days
Although payment is made through crossed cheque drawn on the business bank account of the seller
yet the transaction is inadmissible for the purpose of claiming input tax as the payment was made
after 180 days of the issuance of tax invoice.
(iv) Destruction of damaged goods
Where any goods are returned by the buyer on the ground that the same are unfit for consumption
and are required to be destroyed by the supplier, the goods shall be destroyed after obtaining
permission from the Collector of Sales Tax having jurisdiction, and under the supervision of an Inland
Revenue Officer not below the rank of an Assistant Collector as may be deputed by the Collector for
the purpose and the input tax credit in respect of goods so destroyed shall not be admissible.
(v) Joint and several liability of registered persons in supply chain where tax unpaid
Where a registered person receiving a taxable supply from another registered person is in the
knowledge or has reasonable grounds to suspect that some or all of the tax payable in respect of that
supply or any previous or subsequent supply of the goods supplied would go unpaid, of which the
burden to prove shall be on the department, such person as well as the person making the taxable
supply shall be jointly and severally liable for payment of such unpaid amount of tax
(vi) Payment through credit card
Although payment made through credit card is considered as payment made through banking channel
yet the payment must be verifiable from the business bank accounts of both the buyer and the seller.
Since the director made the payment from his personal credit card, therefore, company will not be
able to obtain input tax on its payment due to non-verifiability of the said payment from the business
bank account of the company.
TAX REFUNDS, ASSESSMENT AND RECOVERY
Refund of Input Tax [Sec 10]
 If the input tax paid by a registered person on taxable purchases made during a tax period
exceeds the output tax on account of zero rated local supplies or export made during that
tax period, the excess amount of input tax shall be refunded to the registered person not
later than forty-five days of filing of refund claim in such manner and subject to such
conditions as the Board may, by notification in the official Gazette specify.
 In case of excess input tax against supplies other than zero-rated or exports, such excess
input tax may be carried forward to the next tax period and shall be treated as input tax for
that period.
 The Board may, subject to such conditions and restrictions as it may impose, by notification
in the official Gazette, prescribe the procedure for refund of excess input tax against other
taxable supplies;
 The Board may, from such date and subject to such conditions and restrictions as it may
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 impose, by notification in the official Gazette, direct that refund of input tax against exports
shall be paid along with duty drawback at the rates notified in the said notification.
 If a registered person is liable to pay any tax, default surcharge or penalty payable under
any law administered by the Board, the refund of input tax shall be made after adjustment
of unpaid outstanding amount of tax or, default surcharge and penalty, as the case may.
 Where there is reason to believe that a person has claimed input tax credit or refund which
was not admissible to him, the proceedings against him shall be completed within 60 days.
For the purposes of enquiry or audit or investigation regarding admissibility of the refund
claim, the period of 60 days may be extended up to 120 days by an officer not below the
rank of an Additional Commissioner Inland Revenue and the Board may, for reasons to be
recorded in writing, extend the aforesaid period which shall in no case exceed (9) nine
months.
Assessment of Tax [Sec 11]
 Assessment, of tax can be made by an officer of Inland Revenue, Where
(i) a person, who is required to file tax return, failed to file the return for a tax
period bydue date; or
(ii) a person pays an amount which is less than the amount of tax actually
payable dueto some miscalculation or error.
 In the above-referred cases, an officer of Inland Revenue shall serve a notice to show causeto
such person. After this, the officer shall make an order for assessment of tax, including
imposition of penalty and default surcharge.
 However, the notice stated above and the order of assessment shall abate if the person
required to file a tax return, files return after the due date and pays the amount of tax
payablein accordance with the tax return along-with default surcharge and penalty.
 Where a person for reasons other than those specified in first para above
(i) has not paid the tax due on supplies made by him; or
(ii)
has made short payment of tax; or
 has claimed input tax credit or refund which is not admissible under the Sales Tax Act.
In the above stated cases an officer of Inland Revenue shall make an assessment of Sales Tax
actually payable by that person or determine the amount of tax credit or tax refund which he has
unlawfully claimed and shall impose a penalty and charge default surcharge in accordance with
section 33 and 34.
 Where any person is required to withhold sales tax under the provision of this act or the
rules made there under, fails to withhold the tax or withholds the same but fails to deposit
the same in the prescribed manner, an OIR shall after a notice to such person to show
cause, determine the amount in default.
 Order under the above paragraph shall not be made by an officer of Inland Revenue unless
a notice to show cause is given within five years of the end of the financial year in which
the relevant date falls, to the person in default. The notice shall specify the grounds on
which the officer is intended to proceed against him. The officer of Inland Revenue shall
take into consideration the representation made by such person and provide him with an
opportunityof being heard.

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  Order as referred above shall be made within one hundred and twenty days of issuance of
show cause notice or within such extended time which the Commissioner may fix. Such
extended time shall not, in any case, exceed 90 days.
 Where a registered person fails to file a return, an officer of Inland Revenue, not below the
rank of Assistant Commissioner, shall determine the minimum tax liability of the registered
person. These powers shall be exercised subject to such conditions as may be specified by the
Board.
Recovery of Short Paid Amounts without Notice [Sec 11A]
 Where a registered person pays the amount of tax less than the tax due as indicated in his
return, the short paid amount of tax along -with default surcharge shall be recovered from
such person by stopping removal of any goods from his business premises and through
attachment of his business bank accounts. Any of these actions may be taken without giving
him a show cause notice and without prejudice to any other action prescribed under
section48 of this Act or the rules made there under.
 Provided that no penalty under section 33 of this Act shall be imposed unless a show
cause noticeis given to such person.
 Provisions of this section shall apply notwithstanding any of the provisions of this Act.

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