FTO Directs FBR to Investigate Issue of Sales Tax on Computerized Arms Licenses

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The Federal Board of Revenue (FBR) will investigate whether the National Database and Registration Authority (NADRA) is charging sales tax on computerized arms licenses issued in the form of cards to the federal/provincial governments.

According to an order issued by the Federal Tax Ombudsman (FTO) to the FBR on issues pertaining to NADRA, the complainant (registered informer of the FBR) filed a complaint filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) against inaction on the part of FBR to take cognizance of the fact that NADRA, Islamabad was not charging sales tax on the supply of goods in the form of Machine Readable Passports; Vehicle Registration Cards and Computerized Arms Licenses.

The complainant stated that he is registered as an informer and according to him the supply of goods/services by NADRA was subject to levy and deposit of sales tax/FED, but no tax/ duty was being charged by NADRA.

Therefore, the complaint is against FBR for their inefficiency in taking cognizance of the fact that the NADRA is not charging sales tax on the supply of

  • Machine Readable Passports
  • Vehicle Registration Cards
  • Computerized Arms Licenses.

The FTO order said that insofar as charging of sales tax on the supply of Computerized Arms License (in the form of cards) to the federal government and provincial governments, is considered, the LTO, Islamabad has stated that Under section 3 (2B) of the Islamabad Capital Territory (Tax on Services) Ordinance, 2001, the tax levied under sub-section (l) is not applicable to regulatory and licensing services rendered or provided by an organization established under a Federal Statute.

NADRA has been established under National Database and Registration Ordinance, 2000 which is a Federal Statute. Therefore, sales tax on arms licensing services of NADRA is not applicable.

The FTO’s findings stated that the NADRA is paying sales tax on the supply of Machine Readable Passports to the Directorate General of Immigration and Passport, Islamabad as the supply of services at 5 percent of value in the light of the ICT (Tax on Services) Ordinance 2001. They are regularly filing sales tax returns as informed by the Large Tax Office (LTO), Islamabad.

NADRA is charging and paying sales tax at 17 percent of the value (as goods) of chip-based Vehicle Registration Cards and as per contention of the Large Tax Office (LTO), Islamabad sales tax is not chargeable on the supply of Computerized Arms Licenses by NADRA in terms of ICT (Tax on Services) Ordinance 2001. However, they are silent about the chargeability of sales tax (on goods) under Sales Tax Act 1990.

In the light of elaborate discussion and legal provisions as supra, the Revenue Division is required to examine chargeability or otherwise of sales tax under the Sales Tax Act, 1990 on Computerized Arms Licenses in the form of cards, being supplied by NADRA, Islamabad to the federal government, and provincial governments on the analogy of Chip-based Vehicle Registration Cards, FTO order added.



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