ST on zero rated sectors local supplies: FBR to seek trade bodies' nod for uniform rate

The Federal Board of Revenue (FBR) will try to pursue the business community of Karachi to apply a uniform sales tax rate on the local supplies of five zero-rated sectors, including textile, leather surgical, carpets and sports goods, instead of existing rates of 4-6 percent.
Sources told Business Recorder here on Friday that it has yet not been decided to apply a combined rate of 5 percent on the local supplies of the zero-rated sectors, instead of lower rates of 4-6 percent sales tax. If the Board and the business community reach consensus on combined rate of 5 percent, it may be notified.
Secondly, there is also no possibility of introducing a very low rate of 2 percent across the board on domestic supplies made to registered or un-registered persons operating in the zero-rated regime. "A uniform rate would be worked out in consultation with the business and trade of Karachi for which FBR Chairman Salman Siddique is on a two days' visit to Karachi", sources said.
They said that the FBR will also ensure to give refunds of sales tax on the import of plant and machinery in minimum possible time to facilitate the industrial undertakings. It is important to mention that the FBR is likely to take up the issue of fake and flying invoices with the concerned associations. Apparently, the phenomenon of fake and flying invoices seems to have increased after facility of zero-rated supplies to registered supply chain of zero-rated sectors. There are apprehensions that the incidence of flying and fake invoices has increased after changes in the zero-rating regime through SRO.283(I)/2011.
In the past, the FBR had assured the Council of All Pakistan Textile Association (Capta) about the applicability of the combined rate on local supplies of zero-rated sectors instead existing rate of 4-6 percent. The Capta had proposed some key changes in the Finance Bill (2011-12) particularly combination of rate 4-6 percent into a single rate of 4 percent. The Capta has informed the FBR that if the FBR wanted to introduce a single rate on the local supplies of unregistered persons in five zero-rated sectors, the existing 4-6 percent should be merged into a single rate of 4 percent instead of 5 percent. The 4 and 6 percent rates were decided in consultation with all stakeholders and if it is very necessary to introduce a combined rate, 4 percent should be notified instead of 5 percent, it added.
In past meetings between FBR and the export associations, tax authorities had said that the 4-6 percent sales tax applicable on the local supplies of five export-oriented zero-rated sectors would be combined into a single rate of 5 percent. The SRO.231 (I)/2011 would be suitably amended before July 1, 2011 for implementation of the single rate for the zero-rated sectors.
Meanwhile, a press release issued by the FBR said here on Friday said that the Chairman of FBR, Salman Siddique, will be visiting Karachi from 9th to 10th July 2011 to hold meetings with Federation of Pakistan Chamber of Commerce and Industry, Karachi Chamber of Commerce as well as other trade bodies. This two-day consecutive meeting is focused on improving the sales tax system and resolving the issues relating to zero rated export sectors and also issues relating to import of machinery. This consultative process will also be focused on finding solutions to the problems and issues linked with the revenue collection, the FBR press release added.