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ISLAMABAD: The Federal Board of Revenue (FBR) has taken a major policy decision of not reverting back to sales tax zero-rating regime for five export-oriented sectors including textile, leather, surgical, carpets, and sports goods, in the upcoming 2021-22.

Sources told Business Recorder here on Thursday that the zero-rating regime would not be restored due to speedy payment of refund mechanism under the “FASTER” system of the Federal Board of Revenue (FBR).

There is a significant progress on account of payment of sales tax refunds under the "FASTER" system, and there is no justification of the restoration of the sales tax zero-rating regime.

"We cannot say that all refunds are paid without delay under the FASTER system, but most of the refunds are now being cleared. A presentation of the FBR to the Finance Ministry, Ministry of Commerce and other departments at the FBR here on Thursday shows satisfactory performance of the FBR regarding payment of sales tax refunds. The FBR has informed the meeting that the system is improving day by day and there is no reason for reverting back to the old system," top officials added.

According to the sources, the government has therefore taken the decision to retain the existing sales tax regime on five export sectors textile, leather, carpets, surgical, and sports goods.

The Ministry of Industries and Production and the Commerce Ministry had proposed the restoration of the zero-rating regime for the five leading export sectors.

The FBR has already opposed a proposal of the textile sector for the restoration of zero-rating regime or applicability of a lower rate of sales tax on five export-oriented sectors.

Exporters have approached the prime minister and different parliamentary committees, underscoring the need for restoring the sales tax zero-rating regime in the budget 2021-22.

The alternate proposal of the industry was to reduce the sales tax rate from 17 percent to a lower percentage like five percent on the five export-oriented sectors. However, the FBR is against the withdrawal of the sales tax regime.

According to sources, the FBR can only propose to the policy makers and the final decision would be taken by the government.

Copyright Business Recorder, 2021

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