Proposed budgetary measures of Sales Tax, FED

ISLAMABAD: Following are the proposed budgetary measures pertaining to Sales Tax and Federal Excise Duty (FED) for FY 2020-21:

• The minimum threshold of supplies by retailers for obtaining CNIC (Computerized National Identity Card) of the buyers is proposed to be increased from Rs 50,000 to Rs 100,000.

• In wake of COVID-19, the Federal Government granted exemption to health related items and equipment through SRO 237(I)/2020 dated March 03, 2020, which is going to expire on June 19, 2020. In the present circumstances in wake of COVID-19, the said period is being extended for another three months starting from June 20, 2020.

• Exemption allowed on import of dietetic foods intended for special medical purposes for the children suffering from Inherited Metabolic Syndrome.

• In order to encourage documentation, it has been decided to provide relief to organized retail sector, which is integrated online with the FBR (Federal Board of Revenue) through Point of Sale system. Their existing sales tax rate is proposed to be reduced from 14% to 12%.

• Eleventh Schedule (withholding tax) is proposed to be amended to provide for deduction of the entire sales tax by the purchaser if the supplier is a non-active taxpayer.

• Rationalization of sales tax of Potassium Chlorate from Rs 70 to Rs 80 per kg to discourage illicit manufacturing of match boxes.

• Concept of conducting audit proceedings through electronic means introduced.

• Ninth Schedule is proposed to be amended in line with Mobile Manufacturing Policy approved by the ECC (National Coordination Committee) of the Cabinet.

• Amendment in the Twelfth Schedule–excluding from VAT (value added tax) the manufacturers importing raw materials and intermediary goods for in-house consumption.

• Insertion of the Tax Laws Amendment Ordinance 2019, relating to tax concessions and exemptions to Gawadar Port and Gawadar Free Zone, in the Finance Bill 2020.

• To strengthen the Alternate Dispute Resolution process and to make it more taxpayer-friendly, it is proposed that the taxpayer is allowed to withdraw his case from any court of law or any appellate authority after decision of ADRC (Alternative Dispute Resolution Committee). Furthermore, the decision of ADRC, once it is conveyed by the taxpayer to the tax authorities, is binding upon the tax authorities.

• The scope of section 73 is proposed to be widened to cover all registered persons supplying taxable goods.

• Board is empowered to fix minimum production on the basis of single or more inputs and for fixation of wastage.

Federal Excise Duty:

• Increase in the rate of FED on cigars, cheroots, and cigarillos and cigarettes from 65% to 100% of retail price - Increase in the rate of FED on filter rods from Rs 0.75 to Rs 1 per filter rod

• Levy of FED on e-liquids of electric cigarettes at Rs 10 per ml

• Levy of FED on caffeinated energy drinks at 25%

• Levy of FED at 7.5% ad valorem in case of locally manufactured double cabin (4x4) pick-up vehicles and at 25% in the case of imported ones

• In the wake of worsening affect of COVID-19 and reduction in production of cement, it has been proposed to reduce FED on cement from Rs. 2 per kg to Rs. 1.75 per kg.

• Concept of conducting audit proceedings through electronic means introduced

• To strengthen the Alternate Dispute Resolution process and to make it more taxpayer-friendly, it is proposed that the taxpayer is allowed to withdraw his case from any court of law or any appellate authority after decision of ADRC.

• Furthermore, the decision of ADRC, once it is conveyed by the taxpayer to the tax authorities, is binding upon the tax authorities.

• Amendment in Section 33 of FED Act 2005 is proposed to bar the Commissioner (Appeals) from accepting any evidence not presented before assessing officer.

• Power of tax authorities to modify orders, etc. pending adjudication in the light of question of law decided by higher courts regardless of appeal against the same is proposed in FE Act.

• Board is empowered to fix minimum production on the basis of single or more inputs and for fixation of wastage.

• The scope of seizure of non-duty paid goods is extended to all products subject to FED besides cigarettes and beverages.