SALES TAX CIRCULAR NO. 1 OF 1989,

DATE 22^ND AUGUST, 1989

SUBJECT:--   ADJUSTMENT OF SALES TAX PAID ON THE RAW MATERIALS WASTED DURING THE MANUFACTURING OF TAXABLE GOODS.

            Section 27(1) of the Sales Tax Act, 1951 provides that the manufactures of taxable goods are entitled of the refund of tax paid earlier on the goods which are to be incorporated into and form a constituent or component part of the taxable goods.

            2.            A question has arisen whether the refund/adjustment of sales tax can be allowed on the quantity of partly manufacture goods/raw materials, which are wasted during the process of manufacture of taxable goods.

            3.            After examining the issue the Board is pleased to state that sales tax refund/adjustment is to allowed on the entire quantity of partly manufactured goods/raw materials constituting inputs for taxable goods. The wastage occurring in the process of manufacture is to be considered as a by product and should be taxed on its own value otherwise exempted or treated in either of the following manners;

(a)        Where so provided, such waste can be removed in terms of procedure prescribed vide Chapter X of the Central Excise Rules, 1944; or

(b)        Where so applied, the wastage, may be destroyed in terms of provisions of Rule 53-C of the Central Excise Rules, 1994.

 Mr. Muhammad Younas Khan

Second Secretary