Boosting revenue generation: FBR proposes standard ST rate on zero-rated items
The Federal Board of Revenue has proposed standard rate of 16 percent sales tax on zero-rated items such as dairy products (cream, milk), bicycles, sewing machines and other items liable to the facility at domestic stage. Sources told Business Recorder here on Tuesday that the input tax adjustment facility would be available in case all such zero-rated items are subjected to the standard rate of sales tax.
Copyright Business Recorder, 2013
It is a major revenue generation measure proposed by the FBR to the Ministry of Finance. In this regard, major changes are expected in SRO549(I)/2008 dealing with the domestic sales tax zero-rating. Another proposal is to impose standard rate of sales tax on all items subjected to domestic sales tax zero-rating. This requires rescinding of the SRO549(I)/2008 etc. However, the FBR has proposed the input tax adjustment facility in all such cases.
Sources said that the FBR has compiled a list of items subjected to sales tax zero-rating on the domestic stage. The proposal is to withdraw sales tax zero-rating facility on all these items and impose standard rate of sales tax on these zero-rated items. Sources said that the FBR my delete most of the zero-rating items from the SRO549(I)/2008. SRO549(I)/ 2008 - the most important notification which may be revised following Board's decision to withdraw zero-rating facility. This notification is related to the zero-rating on certain goods subject to certain condition.
The zero-rated items included dairy products, stationary, exercise books, writing, drawing and marking ink, pens and pencil etc sewing machine household type, cotton seed, oil cake and other sold residues. Other items mentioned in the said notification included bicycles, wheel chairs, energy savers and constructions material for Gwadar Export Processing Zone (EPZ).
The zero-rating is also available on plant, machinery and equipment (whether or not manufactured locally), including parts thereof and plant, machinery and equipment, whether locally manufactured or imported. Zero-rating is also applicable re-meltable scrap, dedicated CNG buses and all other buses meant for transportation of forty or more passengers whether in CBU or CKD condition, trucks and dumpers with g.v.w. exceeding 5 tonnes, bicycles, trailers and semi-trailers for the transport of goods having specifications duly approved by the Engineering Development Board and road tractors for semi-trailers, prime movers and road tractors for trailers whether in CBU condition or in kit form.
Zero-rating is also available on raw materials, components, sub-components and parts if purchased from authorised vendors by a recognised manufacturer of tractors for use in the manufacturing of such tractors under SRO549(I)/2008. Zero-rating is applicable on raw materials, components, sub-components and parts in case imported or purchased locally for use in the manufacturing of such plant and machinery as is chargeable to sales tax at the rate of zero percent.
SRO863(I)/2007 is related to zero-rating on certain goods subject to certain condition (raw material and local purchase for manufacturing of zero rated goods declared in SRO 549). SRO769(I)/2009 deals with the zero-rating on import and supply of polypropylene for manufacturer of mono filament yarn and net cloth. SR0423(I)/2009 has granted zero rating on all product, services and equipment for execution of work for kararo-wadh section of national highway supplied to M/s Taisei Corp Ltd.
Under the Fifth Schedule of the Sales Tax Act, zero-rating has been granted to US Aid programme. As per Fifth Schedule of the Sales Tax Act, zero-rating is available on supply to diplomats, diplomatic mission and privileged person and organisation under various acts and regulations. In accordance with the Fifth Schedule of the Sales Tax Act, zero-rating is applicable on supplies of locally made plant and machinery to EPZ and to petroleum and gas exploration and production sector, they added.