Law: Sales Tax Act, 1990

Section: 7-A, 8, 13, 2(39), 2(41)

Summary: M/s Zalan Logistics challenged the levy of 3% Value Added Tax/Additional Sales Tax (VAT/AST) at the import stage on fresh fruits and vegetables imported from Afghanistan, arguing that although such goods are subject to sales tax upon import, their subsequent local supply is exempt under Entry Nos. 45 and 46 of Part-II of the Sixth Schedule to the Sales Tax Act, 1990. The Court held that sales tax at 18% is chargeable on the import of fruits and vegetables under Section 3, because import and subsequent local supply are separate taxable events. However, the 3% minimum value addition tax under Section 7-A read with the Twelfth Schedule is not chargeable, because it is imposed in lieu of tax on subsequent value addition, whereas the subsequent local supply of these goods is exempt from sales tax. The Court therefore declared that fresh fruits and vegetables are exempt from VAT/AST at the import stage and are not subject to tax under Section 7-A or the Twelfth Schedule. However, refund of amounts already recovered was declined because it required factual determination of whether the tax burden had been passed on to consumers. Tagline: 3% Value Addition Tax cannot be imposed at import stage on fruits and vegetables whose subsequent local supply is exempt from sales tax. ORDER; SYED ARSHAD ALI, J.- M/s Zalan Logistics, a proprietorship concern owned by Akhtar Muhammad, is a registered person under the Sales Tax Act, 1990 ("the Act") as well as the Income Tax Ordinance, 2001 ("the Ordinance"). It is averred in the petition that the petitioner is engaged in the import of fresh fruits and vegetables from Afghanistan through Torkham. The import of fresh fruits and vegetables is subject to the levy of normal sales tax at the rate of 18% under the Act. However, such imports are also subjected to the levy of Value Added Tax ("VAT") at the rate of 3%, notwithstanding the fact that the local supply of fresh fruits and vegetables is exempt from sales tax in terms of Entry Nos. 45 and 46 of Table-II of the Sixth Schedule to the Act. It is the petitioner's contention that the object of imposing VAT/Additional Sales Tax ("AST")…