Sales tax regime: H1 refund payments fell by around 2.3pc

RECORDER REPORT

ISLAMABAD: The Federal Board of Revenue has said that the refund payments have declined by around 2.3 percent in the sales tax regime during the first half of 2011-12.

According to the FBR quarterly report issued here on Friday, sales tax is the leading revenue generation source of federal tax revenues. It contributed around 45% of total tax revenues. The gross and net collection of sales tax has been Rs. 403.1 billion and Rs. 381 billion respectively during July-December 2011-12. The gross and net tax revenues grew by 32.1% and 34.8% respectively. This accomplishment is despite reduction of sales tax rates by 1% in announced in the Federal Budget 2011-12. The refund payments have declined by around 2.3% in the sales tax during the same period. There are two components of sales tax i.e. sales tax imports and sales tax domestic.

The collection of sales tax imports grew strongly by 48.9% and sales tax domestic has also registered a significant growth of 20.6%. Due to better collection from sales tax imports, the share of sales tax imports has gone up from around 50% during July-December, 2010-11 to 55% during the same period of current fiscal year. In fact, imports during 2011-12 reflected around 20% growth during first half of current fiscal.

The share of sales tax on imports in total sales tax has improved from 50% in the first half of 2010-11 to 55% in July-December, 2011-12. The collection of sales tax on imports grew by 48.9% driven by around 20% growth in the value of imports.

The report said that ten major revenue spinners contributed around 81% of the sales tax import collection during July-December 2011-12. Petroleum sector is the top revenue generation source of sales tax imports by contributing more then 1/3rd of the collection of sales tax on imports. As far as the collection of plastic is concerned, the collection grew by 22.8% mainly due to double digit growth in the value of imports.

The report said that the edible oil (Ch:15) is the third top source of sales tax imports with around 9% share in total (STM). The collection of sales tax on imports from edible oils recorded a growth of 36.1% in the collection due to 34.5% growth in the value of imports. The auto sector (Ch: 87) has also exhibited 41% growth in the collection of sales tax imports due to increased imports by around 35%.

Due to withdrawal of zero-rating in March, 2011, the collection of Machinery has vastly improved the collection. The collection from mechanical machinery (Ch:84) grew by 217% while 95.5% growth was also recorded in electrical machinery(Ch:85). Due to withdrawal of exemption from fertilizer in March, 2011, the collection of sales tax import from fertilizer has contributed Rs. 11.6 billion additional collection during July-December, 2011-12. Iron and steel sector (Ch: 72) has exhibited double digit growth of 18.9% in the collection due to 9% growth in its imports.  On the other hand, a sizable growth of 63.8% in the sales tax collection from oilseeds (Ch: 12) has been mainly due to strong growth of 56.8% growth in its value of import. Moreover, the value of imports of organic chemical improved by 34.4% and yielded a growth of 33% in the collection of sales tax, the FBR added.