The Federal Board of Revenue (FBR) has ruled that the federal government and provincial governments must pay a set rate of 18 percent sales tax on computerised arms licences provided by NADRA in the form of cards.
The Federal Tax Ombudsman (FTO) has also instructed the FBR to investigate whether or not sales tax is owed on computerised arms licences under the Sales Tax Act of 1990.
The Tax Ombudsman ordered FBR to investigate whether sales tax under the Sales Tax Act of 1990 should be charged on computerised arms licences as part of the resolution of a complaint. Briefly, the FTC Ordinance Section 10(1) complaint was filed against the FBR for failing to take cognizance of NADRA, Islamabad’s failure to collect sales tax on the supply of goods in the form of computerised arms licence cards.
Shehzad Akhtar, speaking on behalf of NADRA, said at the hearing that the organisation is giving the Ministry of Interior “Services” in the form of printed and supplied cards.
According to the complainant, the sale of cards constitutes the “supply of goods as card” and is therefore considered to be the sale of “goods” for the purposes of the sales tax laws. Following extensive discussion during the hearing, the FTO made recommendations to the revenue division to investigate whether the Sales Tax Act, 1990 applied to computerised weapons licences provided by NADRA to the federal and provincial governments.
According to the LTO Islamabad, “the tax levied under sub-section(l) is not applicable to regulatory and licencing services rendered or provided by an organisation established under a Federal Statute,” as per section 3 (2B) of the Islamabad Capital Territory (Tax on Services) Ordinance, 2001. The National Database and Registration Ordinance, 2000, a Federal Statute, is what authorised the creation of NADRA. As a result, NADRA’s services for licencing weapons are exempt from sales tax.