Sales tax on supply of foodstuff is 7.5%, with no allowable input tax adjustment

KARACHI: The Inland Revenue has clarified that the rate of sales tax on the supply of prepared food, foodstuff and sweetmeat supplied by restaurants, bakeries, caterers and sweetmeat shops is 7.5 percent with the condition that no adjustment of input tax will allowable.

Sr. No 64 of the Eighth Schedule to the Sales Tax Act, 1990 as inserted vide Finance Act, 2019 relates to sales tax on supplies of prepared food, foodstuff and sweetmeats supplied by restaurants, bakeries, caterers and sweetmeat shops.

The rate of sales tax on the supply of above mentioned goods is 7.5 percent with the condition that no adjustment of input tax will be claimed/allowable.

As is evident from the above, there is no ambiguity and law is very clear and unequivocal regarding chargeability of Sales Tax and admissibility of input tax.

 All the restaurants, bakeries, caterers and sweetmeat shops engaged in supply of prepared food, foodstuff and sweetmeats, are advised to charge Sales Tax at the rate of 7.5% to customers/consumers.

However, no input tax shall be admissible to any registered person engaged in supply of above mentioned goods.

In case, sates tax of 17 percent is charged instead of statutory rate of 7.5 percent, the Sales Tax so charged at 17 percent shall be deposited into government treasury in terms of section 3B of the Sales Tax Act, 1990.

The Inland Revenue has advised restaurants, bakeries and caterers etc to issue serially numbered Sales Tax Invoices for all transactions through risk integrated management system (RIMS) without fail.

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