ISLAMABAD: Sales tax on sugar is proposed to be levied on retail price basis by including it in the Third Schedule of the Sales Tax Act, 1990. Muhammad Yawar, tax director, Rafaqat Babar and Co, Chartered Accountants explained that the cottage industry is exempted for sales tax, if their annual turnover is up to Rs3 million, it is proposed to increase the threshold to Rs10 million.
The threshold for furniture outlet/showrooms is increased from 1,000 square feet to 2,000 square feet for inclusion in tier-1 retailer, there are two tiers under Sales Tax Act, 1990, tier-1 retailer are required to charge sales tax and tier-2 retailer taxation is through electricity consumption.
In order to facilitate international athlete, exemption to goods temporarily imported by athletes/sportsmen incorporated in the Sixth Schedule. More relaxation has been considered for the IT industry in the form of exemption on import of plant, machinery and raw material by special technology zone, reduce rate of sales tax @ one percent on local supply of electric vehicles granted, fixed tax on SIM cards is proposed to be deleted retrospectively in order to address litigation.
The concept of constructive payment is proposed in case of purchases as previously banking channel was mandatory and adjustment of payable and receivables to and from the same party was not allowed and same is proposed to be allowed.
It is further proposed that small cars up to engine capacity of 850cc may be exempted from value added tax besides reducing sales tax rate from 17 percent to 12.5 percent.
Under streamline measures, there are various provisions in the Sales Tax Act 1990 which require some corrections or streamlining, while some changes are being proposed for the purpose of Ease of Doing Business for registered persons. The retailer who has acquired point of sale accepting payment through debit or credit cards is also included in the definition of tier 1 retailer. An enabling provision is introduced for prescribing rules for determining transfer pricing of taxable supplies between associates to reflect fair market value in arm's length transaction.
It has been proposed to bring online market place into the sales tax net by considering the online market as a supplier of goods that will affect the online sector as most of business started using the online way for the sale of their product and services, It has been made mandatory for manufacturer of specified goods to obtain brand license. Moreover, zero rating has been proposed to be withdrawn from Petroleum Crude Oil, parts/components of zero-rated plant and machinery, import related products of plant and machinery by petroleum and gas sector and supply, repair and maintenance of ships. Sixth schedule, which specifies the goods exempted from the ambit of sales tax, is proposed to be streamlined and exemptions other than relating to basic food items, health and education are proposed to be withdraw., Eight schedule, which specifies goods chargeable to reduce rate of sales tax, is to be streamlined and reduced rates other than relating to basic food items, health and education are proposed to be brought into standard regime i.e., 17% and to ensure collection of due taxes, sales tax on sugar is proposed to be levied on retail price by including it in third schedule.
Under relief measures, exemption is being given from levy of FED to the industrial units located in FATA and PATA in order to facilitate the people of tribal area and encourage investment and economic growth in these areas, the provision to revise return without prior approval of the Commissioner-IR which is available in Sales Tax Act, 1990 is now proposed to be made under FED Act, 2005, the rate of federal excise duty on telecommunication is proposed to be reduced from 17% to 16%, for establishment of Border Sustenance Markets, exemption from federal excise duty is proposed to be granted on food related and other consumable goods, rising prices of locally manufactured small cars is a major concern for low earning families. Accordingly, it is proposed that small cars up to engine capacity of 850cc may be exempted from federal excise duty, exemption on import and zero-rating on local supplies in respect of raw materials, components, parts and plant and machinery to registered persons is proposed, it is proposed to withdraw federal excise duty on juices and provide relief to this sector as they have suffered due to pandemic.
Under streamlining measures, there are various provisions in the Federal Excise Act, 2005 which require some corrections or streamlining, while some changes are being proposed for the purpose of Ease of Doing Business for registered persons. At places some drafting errors also need to be corrected.
Copyright Business Recorder, 2021