SUNDAY JANUARY 01: Five export-oriented sectors: FBR announces new ST zero-rating regime

ISLAMABAD: The Federal Board of Revenue (FBR) on Saturday announced a new sales tax zero-rating regime for five export-oriented sectors including textile, leather, surgical, carpets and sports goods and a simplified sales tax payment procedure for the commercial importers to be applicable from January 1, 2012. In this connection, the FBR has superseded SRO 1058 (I)/2011 through SRO 1125 (I)/2011 issued here on Saturday.
The new zero-rating regime has been cleared by the Tax Reform Co-ordination Group (TRCG) and Ashfaq Tola Member TRCG played the key role in drafting the final zero-rating regime incorporating suggestions of all stakeholders. The notification, finalised by Ashfaq Tola, has been legally and technically declared as approved by the FBR.
When contacted, Karachi-based commercial importers accepted SRO 1125(I)/2011 and thanked FBR Member Inland Revenue Shahid Hussain Asasd for accepting all genuine demands of the commercial importers. Now, the commercial importers would not only comply with all conditions of the new zero-rating regime, but would also contribute maximum revenue in the national exchequer. "The new zero-rating regime is now clear and it is acceptable to commercial importers. All credit goes to FBR Member IR and other officials for accepting our demands" a commercial importer said.
According to SRO 1125 (I)/2011 dated December 31, 2011, 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, sales tax shall be charged at the rate of zero percent on goods useable as industrial inputs. The goods imported by, or supplies made to certain manufacturers shall be charged sales tax at the rate of five percent. The commercial importers, on import of goods useable as industrial inputs, shall be charged sales tax at the rate of two percent along with one percent value-addition tax 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 percent or to non-zero-rated sectors or unregistered persons at the rate of five percent as the case may be. 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.
Under the new scheme, 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 percent. The supplies of finished products of the sectors specified in condition shall, if sold to the retailers (both registered and unregistered) or end consumers, shall be charged to sales tax at the rate of five percent ad valorem. The supplies of goods, usable as industrial inputs, to registered persons of five zero-rated sectors up to wholesale stage shall be charged to tax at the rate of zero percent.
According to the new scheme, 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 percent 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 percent shall not constitute part of turnover on which the aforesaid turnover tax is to be paid. 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.
Under the revised scheme, a 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 percent or sixteen percent ad val as the case may be;
(xi) 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 supply of electricity and gas to the registered manufacturers or exporters of five zero-rated sectors mentioned in condition (i), shall be charged sales tax at the rate of zero percent in the manner specified by the Board.
The benefit of this notification shall be available to such registered persons who appear on active taxpayers list (ATL) on the website of Federal Board of Revenue and 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, the notification said. This notification shall take effect on and from January 1, 2012, the new sales tax zero-rating regime added.