RGST bill: 'plan B' prepared by FBR

'Plan B', in case the Reformed General Sales Tax (RGST) bill is not approved by parliament, has been prepared by the Federal Board of Revenue (FBR) and submitted to the Ministry of Finance for possible action, sources told Business Recorder. The 'Plan B' includes a proposal to increase the rate of federal excise duty (FED) on selected items, including cement, and restoration of 5 percent excise duty on motorcars.
However, any enhancement in the rate of the FED on a few items would require legislative approval of the Parliament. FED on cement was slashed from Rs 900 to Rs 700 per ton in 2009-10 budget, designed to encourage construction business. And the proposal now is to enhance it to Rs 900 per ton. This would generate an additional amount of approximately Rs 5 billion. Another proposal is to restore excise duty on vehicles, which was withdrawn in 2009-10 budget. The federal excise duty on motor cars @ 5 percent was withdrawn vide SRO 474(l)/ 2009 of June 13, 2009.
The reason for withdrawal was to reduce cost of motor cars and thereby provide relief to the local automobile industry. In case the government accepts the proposal, the estimated revenue of nearly Rs 3 billion could be generated. Sources said that these are merely 'tax proposals', which would be finalised by the policy markers. As rationalisation of tax rates is involved in these proposals, prior approval of Parliament is required for increasing tax rates.
The government has already proposed amendment in the Federal Excise Act, 2005 for increasing the rate of special excise duty (SED) from one percent to two percent through Finance (Amendment) Act, 2010. The Finance (Amendment) Act, 2010 is still pending before the National Assembly for passage. Through amendment of Federal Excise Act, 2005, in the Federal Excise Act, 2005, in section 3A, in sub -section (1), for the words "one percent", the words "two percent" shall be substituted.
The government needs additional local resources to relieve the pressure on the budget caused by extraordinary demands for expenditures relating to rehabilitation of a large number of internally displaced citizens due to the summer floods. For this purpose, it was proposed to amend certain provisions of the Income Tax Ordinance, 2001, and the Federal Excise Act, 2005 through a bill on the Finance (Amendment) Act, 2010. The proposed Bill provides increase in the rate of special excise duty from 1 percent to 2 percent under the Federal Excise Act, 2005. However, the Opposition as well as some coalition members refused to support these additional tax measures and the amendment bill remains stalled in parliament.