Imposition of flood surcharge, FED: ordinance on the cards

The government is likely to promulgate a Presidential Ordinance to impose flood surcharge and federal excise duty bills pending in Parliament since November 2010, in a bid to increase revenue and contain the burgeoning fiscal deficit, it is reliably learnt.
Sources said the only option available to the government after strong resistance by coalition partners and opposition in the Parliament was to go for promulgation of an ordinance to increase the critically needed revenue to contain the fiscal deficit at a level acceptable to the IMF.
The details of the plan were discussed and finalised by high-ups of the Ministry of Finance and the Federal Board of Revenue here on Tuesday ahead of policy-level talks with the IMF delegation. The plan would now be placed before Prime Minister Yousuf Raza Gilani for onward transmission to the President for promulgation, imposing 15 percent flood surcharge and an additional 1.5 percent federal excise duty.
According to sources, tax exemptions being enjoyed by various sectors would also be withdrawn through ordinance by introducing changes in the relevant Statutory Regulatory Orders (SROs). These sectors include fertilisers, pesticides, agriculture implements, packed and branded milk products and withdrawal of GST zero rating on local sales of five export-oriented sectors like textile, leather, surgical, sports goods and carpets.
An official quoted FBR member on RGST, Abrar Ahmad as saying that promulgation of the ordinance was also required to withdraw sales tax exemption and impose 17 per cent tax on fertiliser, pesticides, agriculture implements and local sales of the five export-oriented sectors, textile, leather, surgical, sports goods and carpets. The domestic consumption of imported cotton and cotton yarn would also be liable to levy of 17 percent sales tax. According to sources, the facility of refund would only be available to registered importers so as to encourage the informal or unregistered to avail the refund facility by coming into the tax net.
The special tax regime facility would also be enjoyed by domestic garment sub-sector as sales tax would also be withdrawn and it would be brought into the tax net. Big stores' chains presently are paying only 0.75 per cent sales tax on domestic sales. An official of the finance ministry said that these tax measures would be necessary to contain the fiscal deficit at the level of 5.5 per cent for the current fiscal year and IMF would be informed that the 4.7 per cent agreed with it may not be achievable because of non-materialisation of foreign assistance budgeted for 2010-11.