FBR Announces 18% Sales Tax on Computerized Arms Licenses Supplied by NADRA

The Federal Board of Revenue (FBR) has declared that computerized arms licenses in the form of cards being supplied by NADRA to the federal government and provincial governments attract a standard rate of 18 percent sales tax.

The Federal Tax Ombudsman (FTO) has also directed the FBR to examine chargeability or otherwise of sales tax under the Sales Tax Act, 1990 on Computerized Arms Licenses.

While disposing of a complaint, the Tax Ombudsman has directed FBR to examine chargeability or otherwise of sales tax under the Sales Tax Act, 1990 on Computerized Arms Licenses. Briefly the complaint was filed under Section 10(1) of the Federal Tax Ombudsman Ordinance 2000 (FTC Ordinance) against inaction on the part of FBR to take cognizance of the fact that NADRA, Islamabad was/is not charging sales tax on the supply of goods in the form of computerized arms licenses cards.

During the hearing, Shehzad Akhtar while representing NADRA stated that they are providing ‘Services’ to the Ministry of Interior for printing and supplying cards.

The complainant said that the supply of cards is in fact “supply of goods as card” and falls within the definition of “goods” under the Sales Tax Laws. After elaborate discussion during the course of hearing the FTO made findings to the revenue division 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 to the federal government and provincial government.

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 legal position is that clause (b) of sub-section (2) section 9 of the FTO Ordinance, 2001 bars jurisdiction of the FTO, inter alia, in a matter of ‘determination of liability’ of tax on duty FBR vide letter dated 10-04-2023 has determined that computerized licences in the form of cards being supplied by NADRA, Islamabad to the federal government and provincial governments attract charge of sales tax at standard rate.