Which purchases can a wholesaler not claim input tax on?

A registered wholesaler pays sales tax on what it buys and charges sales tax on what it sells. The difference is paid to the government, but only purchases that pass sections 7 and 8 of the Sales Tax Act, 1990 count as input tax. This page lists the purchases that fail.

What must a purchase have before input tax can be claimed?

Section 7(1) gives a registered person the right to deduct input tax paid or payable during the tax period for taxable supplies made, or to be made, from output tax. It is subject to sections 8, 8B and 73.

Section 7(2) adds conditions. For a local purchase, the buyer must hold a tax invoice “in his name and bearing his registration number”. For imported goods, the buyer must hold a bill of entry or goods declaration in his name showing his sales tax registration number, cleared by customs. For goods bought at auction, a treasury challan in his name and registration number showing payment of sales tax.

On timing, the proviso to section 7(1) says input tax not deducted in the relevant period may be claimed in the return for any of the six succeeding tax periods.

Which purchases does section 8 bar?

Section 8(1) opens with “Notwithstanding anything contained in this Act”, so it overrides the general right in section 7. A registered person cannot reclaim or deduct input tax on:

Clause	What is barred	What it means for a wholesaler
(a)	Goods or services used or to be used for any purpose other than taxable supplies	Stock sold as exempt goods, or used for something other than taxable supplies
(b)	Goods or services the Federal Government specifies by notification	Depends on notifications this site does not hold
(c)	Goods covered by a specified sub-section of the charging section	Narrow; read clause (c) itself
(ca)	Goods or services where the supplier has not deposited the sales tax in the Government treasury	The buyer carries the risk of the supplier’s non-payment
(caa)	Purchases where CREST shows a discrepancy, or input tax not verifiable in the supply chain	Mismatches in the system block the claim
(d)	Fake invoices	No claim on an invoice that is not genuine
(e)	Purchases where the person fails to give information the Board requires by notification	Tied to a Board notification
(f)	Goods and services not related to the taxable supplies made	Items unconnected to the trading business
(g)	Goods and services acquired for personal or non-business consumption	Household purchases through the business
(h)	Goods used in, or permanently attached to, immoveable property, such as building materials, paints, fittings, pipes, wires and cables	Warehouse construction materials, unless bought for resale
(i)	Vehicles in Chapter 87 of the First Schedule to the Customs Act, 1969 and their parts, electrical and gas appliances, furniture, furnishings, office equipment (excluding electronic cash registers)	Delivery vans, office furniture, computers, unless bought for sale or re-sale
(j)	Services where the provincial sales tax law bars input tax adjustment	Governed by provincial law, outside this site
(k)	Agricultural machinery or equipment taxed at 7% under the Eighth Schedule	Rarely relevant to a trader
(l)	From a date the Board notifies, goods and services the supplier has not declared in his return, or where he has not paid the tax shown in his return	The buyer’s claim depends on the supplier’s return
(m)	Input attributable to supplies made to an unregistered distributor, pro rata, where the sale invoices do not bear the recipient’s NIC or NTN as section 23 requires	Applies where the seller supplies unregistered distributors

What if I sell both taxable and exempt goods?

Section 8(2) says a person dealing in taxable and non-taxable supplies “can reclaim only such proportion of the input tax as is attributable to taxable supplies in such manner as may be specified by the Board.” The method of apportionment is set by the Board, not in section 8 itself.

Worked example (illustrative figures)

Nadeem Brothers, a registered wholesaler of cooking oil and soap in Gujranwala, lists its purchases for one month. The amounts are invented.

Purchase	Input tax on invoice	Admissible?	Reason
Soap cartons for resale, invoice in firm’s name and registration number	Rs. 180,000	Yes, subject to section 8B	Meets section 7(2)(i)
Cooking oil for resale, supplier later found not to have deposited the tax	Rs. 90,000	No	Section 8(1)(ca)
Office chairs and a desk	Rs. 12,000	No	Section 8(1)(i), not for resale
Refrigerator for the owner’s home	Rs. 15,000	No	Section 8(1)(g) and (i)

Step by step:

1. Total input tax on invoices: Rs. 180,000 + Rs. 90,000 + Rs. 12,000 + Rs. 15,000 = Rs. 297,000.
2. Inadmissible under section 8(1): Rs. 90,000 + Rs. 12,000 + Rs. 15,000 = Rs. 117,000.
3. Input tax that can be claimed: Rs. 297,000 - Rs. 117,000 = Rs. 180,000.

The Rs. 180,000 is then still subject to the 90% ceiling in section 8B and the payment rules in section 73.

What if the invoice is genuine but I paid in cash?

Section 7(1) is subject to section 73. Payments above the section 73 threshold must go through the banking channel, and section 73(3) says the amount “shall be deposited in the business bank account of the supplier”. The related page on cash payments covers this.

Common mistakes

• Claiming on furniture, computers or vehicles used in the business. Section 8(1)(i) bars these unless they are acquired for sale or re-sale.
• Assuming a proper invoice is enough. Clauses (ca), (caa) and (l) make the claim depend on what the supplier deposited and declared.
• Claiming on invoices in a proprietor’s personal name. Section 7(2)(i) requires the buyer’s name and registration number.
• Forgetting apportionment. A wholesaler of both exempt and taxable goods can reclaim only the share attributable to taxable supplies under section 8(2).

What to check in the official text

Read sections 7, 8, 8B, 23 and 73 of the Sales Tax Act, 1990 as amended to 30 June 2026. Several clauses depend on instruments this site does not hold: notifications under section 8(1)(b), the Board’s notified date for clause (l), the apportionment method under section 8(2), and provincial sales tax laws for clause (j).