Import by commercial importers: FBR to reduce IT to one percent on raw material

In a major move to facilitate the commercial importers, the Federal Board of Revenue (FBR) has decided to reduce income tax, from 5 to one percent, on the import of raw materials and inputs by commercial importers, under SRO1012 (I)/2011.
Sources told Business Recorder here on Friday that the FBR has, in principle, agreed to apply reduced rate of one percent income tax on import of inputs by commercial importers. It is unjustified to charge 5 percent income tax, 3 percent sales tax on value-addition and 5 percent sales tax as per revamped zero-rating regime notified through SRO1012 (I)/2011. The cumulative effect of taxes under SRO1012 (I)/2011 on the commercial importers to be around 13-14 percent which is very high.
It would not be appropriate to impose higher rates of duties and taxes on the commercial importers under the revised zero-rated regime. On the other hand, the customs department has imposed 5 percent income tax on the imported consignments of the commercial importers following imposition of the 5 percent sales tax on such imports made for consumption by the zero-rated regime. Thus, the FBR has agreed to reduce income tax from 5 to one percent on the import of items by the commercial importers of the five zero-rated sectors. Most of the raw materials and inputs imported by the commercial importers are utilised by the five leading export-oriented sectors.
Sources said that the FBR will either issue a clarification to the field formations including Model Customs Collectorates (MCCs) to resolve the issue for applicability of the one percent income tax on the import of raw materials and inputs under the SRO 1012(I)/2011. If it is very necessary, the FBR can further amend the SRO 1012 (I)/2011 to ensure that the higher rate of income tax should not be charged from the commercial importers. Therefore, the FBR can adopt any legal course of action to facilitate the commercial importers to expedite clearance of their consignments at the Karachi port.
It is worth mentioning that the commercial importers had objected to the SRO 1012(I)/2011, which imposed 5 percent sales tax on commercial importers. The Customs department is misinterpreting the said SRO and levying value Addition Tax and enhanced rate of 5 percent income tax. Resultantly, hundreds of consignments of commercial importers were blocked in Karachi.