Diplomats, missions and privileged persons: Sales tax exemptions likely to be abolished

ISLAMABAD: The sales tax exemptions available to diplomats, diplomatic missions, and privileged persons may also be abolished in case the government promulgates Tax Laws (4th Amendment) Ordinance, 2021.

Sources told Business Recorder here on Wednesday that the sales tax exemption is available on the goods imported by various agencies of the United Nations, diplomats, diplomatic missions, privileged persons, and privileged organisations, which are covered under various Acts and, Orders, rules and regulations made thereunder; and agreements by the federal government provided that such goods are charged zero-rate of customs duty under Customs Act, 1969, and the conditions laid therein.

Zero-rating facility is also available on the supply to diplomats, diplomatic missions, privileged persons, and privileged organisations, which are covered under various acts, orders, rules, regulations and agreements passed by the parliament or issued or agreed by the Government of Pakistan.

The presidential ordinance would restrict the sales tax exemptions to only few items. The Sixth Schedule (Exemption Schedule) of the Sales Tax Act 1990 would be completely revamped.

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Except essential food and health items, the government will withdraw sales tax exemptions from the Sixth Schedule.

The withdrawal of sales tax exemptions may also cover exemptions available to diplomats, diplomatic missions, and privileged persons.

The sales tax exemptions, sales tax zero-rating and all kinds of reduced sales tax rates may be subjected to standard rate of 17 percent sales tax.

Sources said that the government may impose 17 percent sales tax on cellular mobile phones in CKD/CBU form under the Ninth Schedule of the Sales Tax Act, 1990. The government will also withdraw all kinds of sales tax zero-rating except exports.

The ordinance would have six major components: (i) No zero-rating; (ii) 17 percent sales tax on mobile phones; (iii) withdrawal of major sales tax exemptions; (iv) continuation of exemptions or zero-ratings on essential food items and health items; (v) imposition of standard rate of sales tax on reduced rates items, and (vi) withdrawal of sales tax exemption subjected to conditions or conditional exemptions.

Copyright Business Recorder, 2021