Q 1: Answer
First of all, we discuss about business. The activities which are done for or to earn profit is called business. If you perform any activities without the aim of earning the profit will not called business. But in income tax law business mean and include trade, commerce, manufacturer, vocation or adventure or concern in the nature of trade commerce, manufacturer, and profession but does not include any employment.
TRADE: It means any purchasing or selling just to earn profit.
COMMERECE: All activities which are helpful in above mentioned services.
MANUFACTURE: The activities that convert the raw materials into finished goods.
PROFESSION: Mental skills e.g doctor, professor, accountant etc.
VOCATION: The abilities to perform some specific activity e.g dancer, singer.

– Profits and gain of any business or profession that are earned during the year.
– Income received or earned from trade, profession or related activities.
– Any income from hiring or leasing any tangible or movable property.
– Any income against management fee that is derived from Modaraba or Management Company.
– Profit on debit.

1- Any expenditures relating to business e.g cost of goods purchased and manufactured, repaire charges of any asset, bad debts, rent of building, commission or bonus paid to employees.
2- Depreciation and amortization on assets e.g. this is only if the assets are depreciable, having the life more than one year, and any expenses which are pre commencement of business.
3- Amalgamation expenses, e.g legal, financial advisory, administrative expenses etc.
4- Scientific Research Expenditure.
5- Cost of training to employees.
6- Expenditure on profit on debt, paid against lease money, any payment to modaraba companies, profit paid by the bank against profit and loss share account. Any amount paid by HBFC to SBP as share in profit, payment made by SBFC to SBP. Profit on debt derived by Financial institutions.

Q 2: Answer
Tax credit is an amount of money that a taxpayer is able to deduct from the amount of tax that they be obligated to the government. The value of a tax credit depends on what the credit is being provided for, and certain types of tax credits are approved to individuals or businesses in particular locations, classifications or industries.

Unlike deductions and exemptions, which reduce the amount of your income that is taxable, tax credits reduce the actual amount of tax owed. Govt may grant a tax credit to promote a specific behavior, such as replacing older appliances with more efficient ones, or to help disadvantaged taxpayers by reducing the total cost of housing.

Under the income tax ordinance 2001 following are the cases where tax credits are allowed.
1) Charitable donations,
2) Investment in shares and payment of life insurance premium.
3) Payment to approved pension fund.
4) Profit on debt for housing.

Q 3: Answer
Registration means the registration of a person under the Sale Tax Act 1990, according to this act registration will be necessary for such persons andbe keeping up in such manner and subject to rules as the FBR may specify, by notification in Official Gazette, prescribe:-

A person who is necessary to get himself registered under the sales tax act 1990 shall present an application in designed or prescribed form for registration to the collector. On receipt of the application the collector or authorized person verify the application and if application found in correct the collector or authorized officer grant the registration to the applicant.

If a person who is necessary to be registered according to the sales tax act 1990, and he does not get registration by self then the collector or authorized officer registered that person under the section 19 of the act. According to this the registered person deemed or considered to have been registered from the date he became liable for registration, and he is liable to pay all the sales tax liabilities which were due on him.

Q 4: Answer
It means any economic activity which is carried on by a person whether it is for profit purpose or not and includes the following:-
i) Any activity relating to business, trade or manufacture,
ii) The activities relating to supply of goods, rendering or providing services,
iii) Anything done or undertaken during the commencement or termination of the economic activity.

But not include
1) Activities performed by an employee for the employer.
2) Activities that are performed as hobby.

It means sale, transfer, lease or other disposition of goods in the course of furtherance of business carried for consideration. Further it includes:-
1) Disposal or auction of goods to satisfy debt.
2) Transfer of goods acquired, produced or manufactured for the purpose of private business or non business use.
3) Possession of taxable goods held immediately before a person ceases to be a registered person.
4) Such other transactions which the Federal Government may specify.

Exempt supply means a supply which is exempt from tax under section 13:- in respect of exempt supply, it shall be accounted for in the return for the tax period during which the exemption is withdrawn from such supply.

– Output tax means tax levied under this act on a supply of goods, made by the person.
– Tax levied under the Federal Excise Act, 2005 in sales tax mode as a duty of excise on the manufacture or production of the goods, or the rendering or providing of the services by the person.
– Provincial sales tax levied on services rendered or provided by the person.

Q 5: Answer
A registered person is required to maintain the following records of goods purchased and supplies made by him.
1) PURCHASE RECORDS: To record purchase, purchase registered shall be maintained on which the following information should be:-
– Description, quantity, value of the goods.
– Name and address along with sales tax registration number of the supplier.

2) SALES RECORDS: To record sales, sales register should be maintained by the supplier and this register should contain the following information.
– Description, value, quantity of supplies made along with name and address of the purchaser.

3) MISCELLANEOUS: Other than above the following records should also be maintained by the registered person.
– Utility bills, salary and wages sheets, purchase and sale contracts, bank statements, debit and credit notes, sales and purchase invoices, stock records etc.

Note: The above mentioned records should be retained by the registered person for the period of five years after the relevant tax year.



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