Law: Sales Tax Act, 1990

Section: 3,7,8,8(1)(h)(i)

Law: Customs Act, 1969

Section: 79,81,104

Sales Tax Act (VII of 1990)--- ----Ss. 8, 7 & 3---Sales Tax---Determination of tax liability---Input tax adjustment---Tax Credit not allowed---Nature of right to adjust input tax under S.7 of the Sales Tax Act, 1990---Adjustment of input tax on goods having direct nexus to taxable supply of registered persons---Scope---Petitioners impugned vires of S. 8(1)(h) & S.8(1)(i) of the Sales Tax Act, 1990 on ground that the same denied adjustment of input tax on goods which had a direct nexus with their taxable supply---Contention of petitioners, inter alia, was that input tax adjustment was a substantive right which could not be deviated upon---Validity---Goods utilized by petitioners in the present case fell under Ss.8(1)(h) & 8(1)(i) of Sales Tax Act, 1990 and were not part of their supply chain and in most of the cases, were not directly related to taxable supplies---Such goods, although were bought for improvement of buildings or businesses of the petitioners, but same were not directly related to their taxable supply nor they were part of the supply chain----Registered person had to establish a direct nexus between goods adjustment which was claimed on to the taxable supply and taxable activity---Right to input tax adjustment in S.7 of the Sales Tax Act, 1990 was subject to the restrictions given in S.8 of the same and as such Ss.8(1)(h) & S.8(1)(i) of the Sales Tax Act, 1990 in no manner infringed upon the rights of the petitioners to claim input tax adjustment which was directly related to the supply chain---High Court observed that the underlining feature of S.8 of the Sales Tax Act, 1990 was that the goods remain part of the supply chain for claiming of input tax adjustment, which was a reasonable restriction and it did not deprive the registered person of any amount due to it---No merit therefore existed in the petitioners' arguments---Constitutional petitions were dismissed, in circumstances. Messrs Ghandhara Nissan Diesel Ltd. v. Collector, Large Tax-Payers Unit and 2 others 2006 PTD 2066; Collector of Customs Sales Tax and Central Excise and others v. Messrs Sanghar Sugar Mills Ltd., Karachi and others PLD 2007 SC 517 = 2007 PTD 1902;…

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