Five export-oriented sectors: TRCG clears draft of revamped scheme SRO

Tax Reform Co-ordination Group (TRCG) of the Federal Board of Revenue (FBR) has cleared the draft of the statutory regulatory order (SRO) of the revamped scheme for five export oriented sectors, including textiles, leather garments, carpets, sports and surgical goods.
Sources told Business Recorder here on Friday that the draft of the revised sales tax zero-rating scheme was discussed threadbare during the 7th meeting of the TRCG held at the FBR Headquarters. The revised SRO would be sent to the Law and Justice Division next week for issuance of the notification to be applicable from January 1, 2012.
According to details, the modalities negotiated with concerned trade was discussed in the TRCG meeting here at the FBR House. The revised scheme would be applicable from January 1, 2012. The single 5 percent rate of sales tax on supplies to retailers and unregistered segment would be levy on items falling under the notification. The supplies made to registered manufacturer of other then five zero rated sector would also charged @ 5 percent.
The import of finished goods by any segment would attract 5 percent sales tax at import stage along with 1 percent value addition tax. Likewise commercial importer would also liable @ 5 percent sales tax at import stage along with 1 percent value addition tax. However, at import stage they would only requires to pay 2 percent sales tax along with 1 percent value addition tax the remaining amount of tax would be paid on disposal of goods on subsequent stage of supplies. The supplies of industrial input would remain zero rated from manufacturing to whole sale stage. All the segment of supply chain would be entitled for input/output adjustment, sources added.
The FBR has finalised the draft of the scheme to be notified after clearance from the Law Division. The draft of the SRO has been studied and cleared by the experts of the TRCG. As per the final draft of the revised zero-rating scheme, the benefit of this notification shall be available to every such person doing business in textile (including jute), carpets, leather, sports and surgical goods sectors, who is registered as manufacturer; importer; exporter and wholesaler. On import by registered manufacturers of five zero-rated sectors mentioned in condition, sales tax shall be charged at the rate of zero per cent on goods useable as industrial inputs. The goods imported by or supplies made to manufacturers, other than manufacturers mentioned in condition shall be charged to sales tax at the rate of five per cent.
In case of importers, import of goods, useable as industrial inputs, shall be chargeable to sales tax at the rate of five per cent and value addition tax at the rate of one per cent. The mode of collection of this tax shall, however, be that sales tax at the rate of two per cent along with one per cent value addition tax shall be paid at the import stage which will be accountable against their subsequent liabilities arising against supply of these goods to the zero-rated sector at the rate of zero per cent or to non zero-rated sectors/unregistered persons at the rate of five per cent. The balance amount shall be paid with the monthly sales tax return or in case of excess payment shall be carried forward to the next tax period, draft notification said.
The import of finished goods ready for use by the general public, shall be charged to tax at the rate of five percent and value addition tax at the rate of one per cent. The supplies of finished products of the sectors shall, if sold to the retailers (both registered and unregistered) or end consumers shall be charged to sales tax at the rate of five per cent ad val. The supplies of goods, usable as industrial inputs, to registered persons of five zero-rated sectors up to wholesale stage shall be zero-rated.
The registered persons who are solely or otherwise engaged in the retail business of these goods or products shall pay sales tax at the rate of five per cent ad val. on their retail sales and shall be entitled to input tax adjustment. They shall not be required to pay any other sales tax leviable on their such retail transactions, however, such retailers shall be liable to pay turnover tax as prescribed under Chapter III of the Sales Tax Special Procedure Rules, 2007, and the goods supplied at the rate of five per cent shall not constitute part of turnover on which the aforesaid turnover tax is to be paid, it said.
The registered manufacturers who process goods owned by unregistered persons shall charge sales tax at the rate of five per cent on the processing charges received by them, provided that no such tax shall be charged from the registered principals. The registered person who has consumed any other inputs acquired on payment of sales tax, whether covered under this notification or not, shall be entitled to input tax adjustment or, as the case may be, refund in respect of the supplies made by him either at the rate of zero per cent or five per cent or sixteen per cent ad val and the registered manufacturers shall be entitled to adjustment of input tax paid on machinery parts, spares and lubricants acquired by them for their own use.
The draft SRO added that the supply of electricity and gas to the registered manufacturers/ exporters of five zero-rated sectors shall be zero rated. The benefit of this notification shall be available to such registered persons who appear on active taxpayers list (ATL) on the website of FBR. This notification shall apply from ginning onwards in case of textile sector; production of PTA or MEG for synthetic sector; regular manufacturing in case of carpets and jute products; tannery in case of leather sector and organised manufacturing in case of surgical and sports goods. This notification shall take effect on and from the 1st day of January 2012, final draft of the SRO added.