Net impact of sales tax measures to be around Rs 21.1 billion

The net impact of sales tax measures taken in budget (2011-2012) would be around Rs 21.1 billion including withdrawal of 21 sales tax exemptions and inclusion of defence Stores, bricks, computer software and aircrafts into the documented regime.
A technical briefing was arranged by the FBR to apprise reporters about taxation measures here on Friday in which it was told that that the Finance Bill 2011 proposed new taxation measures of sales tax and federal excise of Rs 31.3 billion. The sales tax relief to different measures would cost Rs 52.4 billion to the national kitty. Thus, the net impact would be around Rs 21.1 billion in 2011-2012. The FBR has provided relief of customs duty of around Rs 2.14 billion by tariff rationalisation. There is no revenue gain from customs duty or regulatory duties. On the sales tax side, the imposition of taxes would generate Rs 31.3 billion and sales tax relief has been granted to the tune of Rs 52.4 billion.
On the income tax side, the FBR has provided relief to the tune of Rs 3.8 billion during 2011-2012. This is for the first time that the FBR has not taken any revenue generation measure on the direct taxes side, but take administrative and enforcement measures to broaden the tax-base. Therefore, the FBR will not get any revenue in the form of income tax through the Finance Bill 2011-2012.
Through the Finance Bill (2010-2011), on locally manufactured cigarettes, if retail price exceeds twenty one rupee per ten cigarette, the 65 percent of retail price will be charged as tax. For cigarettes if retail price exceeds Rs eleven and fifty paisa per ton cigarettes, six rupee and four paisa per ton cigarettes plus 70 percent incremental rupee or part thereof. For price of cigarettes if does not exceed eleven rupee and fifty paisa per ten cigarettes, six rupees and four paisa per ten cigarettes will be charged.
On taxation measure side, the imposition of 16 percent GST on Defence Stores would fetch Rs 10 billion, revision of excise duty on cigarettes Rs 9 billion plus and imposing GST on bricks, and building blocks, computer software, aircrafts, bulldozers and import and supply of CNG buses would bring additional Rs 7 billion. The government also proposed withdrawal of SRO based exemptions by imposing 16 percent GST on CNG kits, clynder, phosphoric acid, Rock Phosphate and imported mineral oil.
FBR Member Inland Revenue Service Khawar Khurshid Butt explained that the Board has also proposed abolishing of special excise duty in the budget. He said that the government aimed to collect Rs 50 billion additional through improved administrative measures so the net addition after excluding relief measures the net addition would be within the range of Rs 27 to 29 billion. The FBR took benchmark of Rs 1,588 billion as basis for setting the tax collection target for the next fiscal year and by assuming nominal growth in the range of 18.5 percent including 14.5 percent inflation and 4.2 percent GDP growth would fetch up to Rs 1882 billion. The remaining amount of Rs 50 to 70 billion will be obtained through administrative measures.
Most of the FBR's measures have provided relief to the taxpayers, but no major revenue generation measure has been taken. However, the FBR is confident that the FBR will be able to collect around Rs 70 billion by taking enforcement measures on the sales tax side and improvement in the withholding tax collection, he added.
As major step for providing relief, the government reduced the GST rate from 17 percent to 16 percent and that one decision would result into drop of revenues to the tune of Rs 35 billion. The government also increased taxable ceiling of income tax from Rs 3,00,000 to Rs 3,50,000 which means that who are earning more than Rs 29,166 per month will be liable to pay income tax. The government has also abolished GST on sugar and imposed 8 percent excise duty. The Member IRS said that the government took conscious decision to exclude all kind of food items from GST net and that paved the way for abolishing GST on sugar.
When contacted, a tax expert was of the view that the carry over of the measures taken by the FBR through withdrawal of sales tax exemptions in accordance with the decision of March 15, 2011 may generate another Rs 75 billion in the next budget so the additional measures in the budget stood at Rs 106 billion and with nominal growth of 18.5 percent the FBR was aimed at collecting a highly ambitious tax collection target of Rs 1,952 billion in the next fiscal year compared to revised target of Rs 1,588 billion for outgoing fiscal year, requiring a growth by 22.9 percent in the next financial year, tax expert added.