FBR allows time relaxation for issuance of credit notes

KARACHI: The Federal Board of Revenue (FBR) has allowed extension in time limitation for issuance of ‘credit notes’ by companies manufacturing food items in terms of section 9 of the Sales Tax Act 1990 read with Rule 22 of Sales Tax Rules, 2006.
The decision has been taken in exercise of powers conferred under section 74 of the Sales Tax Act with a view to mitigating the hardship faced by companies manufacturing perishable food items having an expiry date.
If such items are returned on account of becoming unfit for consumption and are then destroyed in accordance within procedure and conditions stipulated in Rule 23 of Sales Tax Rules, 2006 the corresponding ‘credit notes’ may be issued within the tax period in which goods are so destroyed.
It may be mentioned here that FBR had been approached by National Food Limited with the request that food industry largely dealt with perishable items having an expiry term of 2-3 years from the date of manufacturing resulting in return of goods around the date of expiry due to item becoming unfit for consumption.
The companies have to accept the rejected stock as a business practice and refund prices of such goods including sales tax.
However, they face hardship because they are not able to make corresponding adjustment in Sales Tax Returns in view of stipulation of section of the Sales Tax Act read with Rule 22 of Sales Tax Rules, which provide for issuance of credit or debit notes within 180 days of the relevant supply.
This period is further extendable by 180 days by the Commissioner.
However, even this period had been contested to be not sufficient in case of food items.

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