Pakistan Court Rules Against Additional Tax on Poultry Feed Sales to Unregistered Farmers

Pakistan's Federal Constitutional Court (FCC) has ruled that poultry feed manufacturers and farmers are exempt from paying an additional tax, overturning a previous Lahore High Court decision. The FCC determined that imposing a 4% tax on supplies made to unregistered entities under Section 3(1A) of the Sales Tax Act, 1990, is unjust and contrary to the sales tax regime.

The ruling came in response to appeals filed by Shahzor Feeds (Pvt) Ltd, Lahore Feeds Ltd, and S.S. Feed Mills Pvt Ltd. These companies were challenging an order from the Commissioner (Inland) Revenue, LTU, Lahore, which held them liable for the additional tax because their customers, the poultry farmers, were not registered. The petitioners argued that poultry farmers are often exempt from tax registration under the law.

The FCC bench, led by Justice Aamer Farooq, noted that while the poultry industry itself is not exempt from tax, imposing this specific additional tax on manufacturers supplying to unregistered farmers creates an anomaly. The court emphasized that the law's intent was to encourage registration, but it should not penalize farmers who are legally exempted from registering. Therefore, making manufacturers liable for this tax, which would ultimately be passed on to the farmers, was deemed unfair and against the established sales tax system.