Tax laws

FBR Explains Discount Under Sales Tax Laws

ISLAMABAD: The Federal Board of Revenue (FBR) has explained the payment discount related to invoices issued via Point of Sale (POS) by Tier 1 retailers.

The FBR explained through a official note of March 17, 2022 this discount has been authorized in the form of price reduction in seasonal sales / sales and the cash consideration is received after the discount has been authorized.

It is specified that the value of the supply for sales tax purposes is the actual value received in monetary terms excluding the amount of sales tax and not the gross value. “Therefore, sales tax will be calculated and charged on the actual price or reduced accordingly,” the FBR added.

The FBR previously issued clarifications in this regard through the decree of October 13, 2021 on the standardized format of the sales tax invoice notified by OAR 1006(I)/2021 of August 09, 2021.

The tax authority said representations from taxpayers and bar advice had been received seeking further clarification on the “commercial rebate”.

He stated that the value of the supply within the meaning of section 2(46) of the Sales Tax Act 1990 in relation to the taxable supply means the consideration in money which the supplier receives from the recipient for this supply, but excluding the amount of tax.

In the previous explanation dated October 13, 2021, the FBR clarified that the discount, if any, to be granted by a retailer must be represented horizontally on the invoice, i.e. from left to right.

LEARN MORE: The commercial discount must be displayed on the invoice: FBR

“Captions such as total, sales tax, allowable discount appearing at the bottom of the invoice are stand-alone notations and do not necessarily add or subtract.”