ACCT-370

APPLIED TAXATION

ASSIGNMENT 3

Name : Daud Nofel

Roll # : 2020-110173

Q. M/S Al-Khair Paper Works, got itself registered with the Sales Tax Department on 16 August 2018.
It is engaged in the business of producing and supplying both books (exempt) and stationery items
(taxable). The firm commenced production/sale from October 2018. It procured heavy duty paper
for Rs. 9 million inclusive of GST in September 2018 for production until December 2018. Of this,
70% was used for manufacturing taxable supplies. It also utilized common inputs for producing
books and stationery items as per follows:

September 2018

Item Value GST Total Price

Ink 400,000 68,000 468,000

Printing plates 800,000 136,000 936,000

Chemical 300,000 51,000 351,000

Glue 100,000 17,000 117,000

Thread 50,000 8,500 58,500

Electricity 20,000

October 2018

Item Value GST Total Price

Electricity 100,000
 November 2018

Item Value GST Total Price

Chemical 10,000 1,700 11,700

Gum 45,000 7,650 52,650

Thread 5,000 850 5,850

Electricity 30,000

December 2018

Item Value GST Total Price

Electricity 25,000

January 2019

Item Value GST Total Price

Ink 300,000 51,000 351,000

Plates 100,000 17,000 117,000

Electricity 40,000

February 2019

Item Value GST Total Price

Electricity 68,000 468,000

Details of month-wise sales exclusive of GST are as follows:

Month Taxable Supply Exempt Supply

October 15,000,000 500,000

November 20,000,000 1,000,000

 December 5,000,000 3,000,000

January 4,000,000 0

February 6,000,000 700,000

In the light of the above, answer the following questions with reference to provisions of the Sales Tax Act:

1) When would the firm start submission of its sales tax returns? 3 marks

When talking about Sales tax, the relevant tax period is considered to be from the start of the month till
the end of the month and U/S 26, registered persons have to submit their correct sales tax returns to a
designated bank prescribed by the FBR by the 15th of the next month (which is mentioned U/S 2(9) ).
However, although registered persons file their taxes later on, they have to pay sales tax at the “time of
supply” i.e. the time you receive payment or the time you receive delivery of goods; whichever comes
earlier. This business had registered itself with the FBR on 16th August 2018 but started making sales in
the month of October 2018 i.e. “time of supply”. Therefore, they will start filing returns from the next
month onwards i.e. 15th November 2019 and then the 15th of every month thereon for successive tax
periods.

2) What is the adjustable input tax related to paper alone? 2 marks

Cost of Heavy Duty Paper (including GST) = Rs. 9,000,000

Cost of Hevay Duty Paper (excluding GST) = 9,000,000/1.17 = Rs.7,692,308

GST on Heavy Duty Paper = Rs. 1,307,692

Proportion of GST input tax on Taxable goods = 1,307,692 * 70%

= Rs. 915,384

3) Mention the amount of GST/output tax against each period’s supply: 5 marks

Month : October
Taxable Supply : 15,000,00
GST : 2,550,000

Month : November
Taxable Supply : 20,000,00
GST : 3,400,000
 Month : December
Taxable Supply : 5,000,00
GST : 850,000

Month : January
Taxable Supply : 4,000,00
GST : 680,000

Month : February
Taxable Supply : 6,000,00
GST : 1,020,000

4) What would be the amount of tax deposited in the government treasury for tax periods
September, October, November, December, January? 10 marks

Tax Period Output Tax Input Tax + Adjustment Payment to Unadjusted

for the Tax b/f Amount Allowed Treasury Input Tax c/f
Period to next Tax
(B) (C = 90% * A) (D)
Period
(A)
(E = B – C)

September 0 1,206,191 0 0 1,206,191

October 2,550,000 96,774 + 2,295,000 1,247,035 0

1,206,191 =
1,302,965

November 3,400,000 38,286 3,060,000 3,361,174 0

December 850,000 15,625 765,000 834,375 0

January 680,000 108,000 612,000 572,000 0

The calculations done to arrive at the Input Tax amounts for the respective months as mentioned above
are shown on the next page.