Supply of goods: Unified rate of sales tax being worked out, FBR tells provinces

ISLAMABAD: The Federal Board of Revenue (FBR) has informed provinces that the federal tax authorities are actively working on a unified standard rates/single unified rate of sales tax on supply of goods under federal laws.

Sources told Business Recorder here on Saturday that the issue of harmonization of sales tax rate, base and threshold was discussed during the last meeting of the Executive Committee of the National Tax Council (NTC) held at the Finance Division. According to the decision of the NTC, the FBR and the provincial revenue authorities would share their working papers on the harmonization of sales tax rate.

Sources said that the representative of the Khyber Pakhtunkhwa Revenue Authority (KPRA) stated that the sales tax rates are fragmented. However, the tax rates on some services like telecom/oil tankers etc are common. He proposed that tax rates on nation-wide services should be common, however, localized services' rates should be open. Rate harmonization should be in phases and sector-wise. Besides, the rate harmonization, the harmonization of legislative system is also required. He suggested that the FBR should reduce tax rates and review exemptions. There should be three categories of rates i.e. high rate, standard rate and low rate of sales tax.

Senior Advisor, Sindh Revenue Board (SRB) submitted a viable recommendation that the high tax rate is not suitable and by decreasing tax rates the revenue could be enhanced. There should be one tax rate for the federation and the provinces. He proposed effective tax rate at 13 percent instead of 16.6 percent. Senior official stated that the tax rates should be lower as there is no long term benefit of enhancement of sales tax.

Chairman Punjab Revenue Authority (PRA) stated that base harmonization/exemptions are similar. There is a need to first agree on rate harmonization and then move towards base and threshold.

Member FBR stated that presently there are five tax jurisdictions/tax administrations. He informed that the FBR is already working on unified standard rates/single unified rate of sales tax on supply of goods.

The Additional Finance Secretary (AFS) of Finance Division stated that all the five tax administrations work on what is the most optimal rate for each jurisdiction and come up with their proposals. The issue of common base and registration threshold will be taken up subsequent to that, sources added.

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