SC rules in favor of FBR, rejects input tax adjustment claim on construction materials

ISLAMABAD, Jul 17 (APP): The Supreme Court of Pakistan has ruled that claims for input tax adjustment on construction materials, such as cement and steel used in the construction of factories or other immovable structures, are not admissible under the Sales Tax Act, 1990.

The court further emphasized that mandatory legal requirements, particularly those concerning banking channels and the deposit of tax into the national exchequer, could not be overlooked.

A three-member bench, comprising Chief Justice Yahya Afridi, Justice Irfan Saadat Khan, and Justice Shakeel Ahmed, accepted the civil appeal (No. 939/2018) filed by the Commissioner Inland Revenue. The court set aside the decisions of the Sindh High Court and the Appellate Tribunal Inland Revenue (ATIR), effectively restoring the original order of the tax department. The judgment was reserved on July 7, 2026.

The court declared that the input tax adjustment claim on cement and steel filed by Bawany Sugar Mills for the period of July to December 2013 was in violation of the law and relevant SROs.

Furthermore, essential legal requirements, including payments through banking channels, the submission of tax by the supplier, and the provision of required records, had not been fulfilled.

The Supreme Court clarified that a concession made by any government representative or lawyer on a point of law was not binding on the court, as there could be no estoppel against the law. It was the court’s responsibility to ensure the correct interpretation of the law. The verdict noted that the issues in this case were not merely matters of fact but involved significant questions of legal interpretation; therefore, the High Court and the ATIR erred by treating them solely as factual disputes.