Five percent combined ST rate acceptable by zero-rated sectors

Textile Association of the Council of All Pakistan Textile Associations (CAPTA) has in principle agreed to accept combined rate of 5 percent, instead of 4-6 percent, on the local supply chain of five zero-rated sectors in the budget for 2011-12.
M Jawed Bilwani, spokesman and co-ordinator of CAPTA, in an exclusive talk with Business Recorder here on Saturday said that in case the FBR introduces a single lower rate of 5 percent, replacing existing 4-6 percent sales tax, on the local supply, it would be acceptable.
The combined lower rate would be acceptable to the business and trade ie combination of 4-6 lower rates into a single rate of 5 percent. It has been decided that inputs of these five major export sectors will remain zero-rated and the present system of four and six percent sales tax on registered and unregistered units, respectively, will be merged into a fixed tax of five percent.
However, he expressed concerns over any move to impose 17 percent sales tax on the local supply chains of five zero-rated sectors to generate around Rs 27 billion in 2011-12. The government had taken all stakeholders on board and solemnly promised that zero-rating for the five zero-rated sectors would continue for a period of three years which had restored the confidence among the representatives of the five zero-rated sectors", Bilwani said.
"If the government break its promise, the confidence of the investors who are already heavily burdened due to several adverse factors, would be shattered as this concerns 50-55 percent of the investment and would result in flight of capital", he added.
If the reduced rate of 4-6 percent sales tax on the local supplies made to the unregistered persons of five zero rated sectors is being replaced with the standard rate of 17 percent sales tax, it would not be acceptable to the exporters. He said that the government had also assured that temporarily sales tax on capital goods would be imposed for a period of two months and would be abolished in the forthcoming budget.