Certificate in Accounting and Finance Stage Examination

December 23 ,2023
40 minutes – 28 marks
Additional Reading Time – 5 minutes

CAF-2 Tax Practices

Test-10
Instructions to examinee
(i) Answer All Three Questions
(ii) Answer in Black pen only

Question-1
Confidence Engineering (CE), a sole proprietorship, is registered under the Sales Tax Act, 1990. CE is engaged in
the business of manufacturing and supplying auto parts. Following information is available from CE‘s records for
the month of February 2023:
Rs. in million
Purchases
Taxable goods from registered persons 338
Taxable goods from unregistered persons 60

Supplies
Taxable goods to registered persons 220
Taxable goods to unregistered persons 40
Additional information:
(i) Taxable goods from registered persons include wires and cables of Rs. 6 million, which were used in the
repair of machinery.
(ii) Taxable goods from unregistered persons include goods worth Rs. 14 million purchased from a cottage
industry.
(iii) Taxable goods to registered persons include:
 auto parts of Rs. 5 million, which were supplied free of cost in exchange of defective parts
covered under warranty.
 auto parts of Rs. 4 million, which were withdrawn by the owner for his personal use.
 raw materials of Rs. 2 million, which were given to factory engineer for his personal use.
 goods of Rs. 32 million, which were sold to Pray Traders (PT) at a credit term of 2/10, n/30. PT
paid the amount within 10 days and availed the discount.
(iv) Taxable goods to unregistered persons include goods of Rs. 16 million provided to a cottage industry.
(v) Raw materials of Rs. 25 million were destroyed due to a fire incident at the factory store. All such
materials were purchased from registered suppliers.
(vi) Raw materials of Rs. 26 million were returned to suppliers. The materials were purchased in November
2022.
(vii) A sales tax invoice of Rs. 8 million dated 15 July 2022 was erroneously not declared in the sales tax
returns for the month of July 2022 and onwards.
(viii) Taxable goods of Rs. 19 million were returned by the customers. These goods were sold in July 2022.
(ix) Electricity bill of Rs. 1.2 million was paid in cash.
(x) Sales tax credit brought forward from last month amounted to Rs. 27 million.
All the above figures are exclusive of Sales Tax which is payable at the rate of 18fa%. Assume that proper
debit/credit notes were issued for the purchase and sales returns.
Required:
(a) In the fight of the provisions of the Sales Tax Act, 1990 and Rules made thereunder, compute the amount
of sales tax payable by CE and input tax to be carried forward, if any, for the tax period February 2023.
(Show all relevant exemptions, exclusions and disallowances) (15)
 Tax Practices Page 4 of 2

(b) State the reason(s) for your treatment of all exemptions, exclusions and disallowances while computing
CE‘s sales tax liability in part (a). (04)
Question-2
(a) Following are the independent transactions carried out by different enterprises:
(i) In November 2022, an agreement for the acquisition of machine on hire purchase was signed. In
December 2022, the machine was acquired under this agreement against 25% down payment of
Rs. 30 million. The remaining balance is to be paid in 24 equal monthly installments of Rs. 4.5
million each.
(ii) In December 2022, an advance of Rs. 12 million was received against delivery of goods to be
made in March 2023.
(iii) A machine of Rs. 38 million was purchased in July 2022 but it was put to use in November 2022.
(iv) Goods of Rs. 7 million were sold in September 2022 but due to limited storage capacity at
buyer‘s premises, the goods were delivered in January 2023.
Required:
In the light of the provisions of the Sales Tax Act, 1990 and Rules made thereunder, identify and discuss the time
(month) of supply for the chargeability of sales tax in respect of the above transactions. (05)
(b) In the light of the Sales Tax Act, 1990 and Rules made thereunder, identify the situation(s) under which
the Inland Revenue Department may recover the amount of sales tax from a person without issuing him a
show cause notice. Also state the procedure for the recovery of the said amount. (04)

.
 Tax Practices Page 4 of 3

Rates of Tax for Individuals and

Association of Persons

S. No Taxable Income Rate of Tax

1. Where taxable income does not exceed 0%
Rs. 600,000
2. Where taxable income exceeds 7.5% of the amount exceeding Rs. 600,000
Rs. 600,000 but does not exceed
Rs. 800,000
3. Where taxable income exceeds Rs. 15,000 + 15% of the amount exceeding
Rs. 800,000 but does not exceed Rs. 800,000
Rs. 1,200,000
4. Where taxable income exceeds Rs. 75,000 + 20% of the amount exceeding
Rs. 1,200,000 but does not exceed Rs. 1,200,000
Rs. 2,400,000
5 Where taxable income exceeds Rs. 315,000 + 25% of the amount
Rs. 2,400,000 but does not exceed exceeding Rs. 2,400,000
Rs. 3,000,000
6 Where taxable income exceeds Rs. 465,000 + 30% of the amount
Rs. 3,000,000 but does not exceed exceeding Rs. 3,000,000
Rs. 4,000,000
7. Where taxable income exceeds Rs. 765,000 + 35% of the amount
Rs. 4,000,000 exceeding Rs. 4,000,000

Where the income of an individual chargeable under the head ―‗salary‖ exceeds seventy-five per cent of his taxable
income, the rates of tax to be applied shall be as set out in the following Table, namely:—

S. No Taxable Income Rate of Tax

(1) (2) (3)
Where taxable income does not exceed 0%
1.
Rs. 600,000
2. Where taxable income exceeds 2.5% of the amount exceeding
Rs. 600,000 but does not exceed Rs. 600,000
Rs. 1,200,000
3. Where taxable income exceeds Rs. 15,000 + 12.5% of the
Rs. 1,200,000 but does not exceed amount exceeding Rs. 1,200,000
Rs. 2,400,000
4. Where taxable income exceeds Rs. 165,000 + 22.5% of the
Rs. 2,400,000 but does not exceed amount exceeding Rs. 2,400,000
Rs. 3,600,000
5. Where taxable income exceeds Rs. 435,000 + 27.5% of the
Rs. 3,600,000 but does not exceed amount exceeding Rs. 3,600,000
Rs. 6,000,000
6. Where taxable income exceeds Rs. 1,095,000 + 35% of the
Rs. 6,000,000 amount exceeding Rs. 6,000,000
 Tax Practices Page 4 of 4

Rates for disposal of immovable property

Gain
S.No. Holding Period Open Constructed Flats
Plots Property
(1) (2) (3) (4) (5)
1. Where the holding period does not exceed one year 15% 15% 15%
2. Where the holding period exceeds one year but does 12.5% 10% 7.5%
not exceed two years
3. Where the holding period exceeds two years but does 10% 7.5% 0
not exceed three years
4. Where the holding period exceeds three years but does 7.5% 5% -
not exceed four years
5. Where the holding period exceeds four years but does 5% 0 -
not exceed five years
6. Where the holding period exceeds five years but does 2.5% - -
not exceed six years
7. Where the holding period exceeds six years. 0% - -

Rates of tax for securities (2024 and onwards)

Holding Period Securities acquired on or Securities acquired
before 30.06.2022 on or after
(Between 1.7.13 – 30.6.22) 01.07.2022
1. Where the holding period does not exceed one year 15%
2. Where the holding period exceeds one year but does exceed
12.5%
two years
3. Where the holding period exceeds two years but does not
12.5% 10%
exceed three years
Where the holding period exceeds three years but does not [Irrespective of the holding 7.5%
4. period]
exceed four years
Where the holding period exceeds four years but does not 5%
5.
exceed five years
Where the holding period exceeds five years but does not 2.50%
6.
exceed six years
7. Where the holding period exceeds six years 0%
Future commodity contracts entered into by members of 5%
8.
Pakistan Mercantile Exchange

Rates to calculate Depriciation

Assets Rate of
depreciation
Buildings (All types) 10%
Furniture and fittings, Plant and machinery – general, Motor vehicles and ships, Technical and 15%
professional books
Computers and allied items including printer, monitor and IT related plant and machinery 30%
Aircrafts and aero engines 30%
In case of mineral oil concerns the income of which is liable to be computed in accordance with the
rules in Part-I of the Fifth Schedule. 20%
Offshore platform and production installations.
A ramp built to provide access to persons with disabilities not exceeding Rs. 250,000 each. 100%