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KARACHI: The Karachi Chamber of Commerce & Industry (KCCI) has suggested that the Sales Tax on medical devices should be completely exempted. The proposal may be considered on humanitarian ground.

The KCCI noted that this allows product availability at the economical price to the patients.

The chamber pointed out that the goods supplied to hospital run by the federal or provincial governments or charitable operating hospitals of 50 beds or more or the teaching hospitals of statutory universities of 200 or more beds.

Outcome

Sales Tax is payable at the import stage for the medical devices. However, when supplying medical devices to the government hospitals, charitable hospitals and medical university related hospitals then sales tax exempted. Therefore, the sales tax paid at import stage cannot be charged from such hospitals as input.

The chamber noted that furniture industry in Pakistan mainly comprises work-shops employing artisans and manual labor, except the few entities which import and resell modular furniture to retailers on a larger scale. Tax authorities and field officers in many parts of Pakistan are issuing notices to the furniture shops and work-shops to register as Tier 1 retailer which is unjust and not practicable for this trade.

Outcome

Furniture Shops do not fulfill the criteria defined under Sec 2, Sub-Sec 43A of Sales Tax Act 1990 because: 1. Furniture does not fall in Category of Fast Moving Consumer Goods (FMCG).

  1. Furniture shops/showrooms are only for the purpose of display of bulky pieces of furniture and to get orders from customers, rather than retail sale. The display requires area larger than 1000 feet and an anomaly is created under the Sub- Section 43A which wrongly classifies such shops/showrooms as Tier 1 Retailer.

  2. With rapid increase in rates of electricity, the amount of twelve hundred thousand in a year for commercial establishment should not be made a condition to qualify as Tier 1 retailer.

  3. Under definition of cottage industry (5AB), the amount of turnover of Rs 3.0 million is very unrealistic. Such cottage industry cannot employ 10 persons or earn a profit of even Rs 25000 per month after paying for materials, labor and overheads.

The chamber proposed that a. Furniture shops/showrooms and workshops which are not part of national or international chain of Stores and not located in an air-conditioned mall, should be excluded from the scope of Sec 2 (Sub Sec 43A) b. All such furniture shops and work-shops may be included in cottage industry (5AB) or treated as SMEs. c. Amount of turnover as defined under 5AB should be enhanced to Rs.50.0 million. d. Minimum covered area defined for inclusion in Tier 1 for a furniture showroom/shop does not have relevance in furniture business as it does not reflect the volume of sales or turnover and therefore should not be the parameter to determine the Tier of retailer

Benefits: 1. Stop harassment of shop-keepers, show room and work shop owners in the name of registration in Tier 1. 2. Protect the employment of hundreds of thousands skilled workers artisans and laborers. 3. Preserve the industry of traditional hand-crafted furniture spread all over the country. The KCCI pointed out that consumption of black tea in Pakistan is 240,000 metric tons, but the imports through legal channels is hardly 100,000 metric tons due to very high rates of customs duty, sales tax, regularity duty and WHT. Remaining requirement is fulfilled by smuggling, ATT, and imports under various exemptions/concessions granted to PATA and Azad Kashmir which conduct 90% of official imports and sold all over Pakistan in tariff areas.

Copyright Business Recorder, 2021

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