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ISLAMABAD: The Senate Standing Committee on Finance has strongly opposed the government’s move to increase sales tax of 17 percent on gold, diamonds, and precious stones as well as on dairy products, bricks, aircrafts, plants and machinery in the Finance Bill 2021-22.

During review of the Finance Bill 2021-22, here on Wednesday, the committee members strongly opposed move for raising reduced rates of sales tax on gold, diamonds and precious stones, increasing GST on bricks to standard rate of 17 percent, increasing tax for importing aircraft and spare parts, withdrawal of exemption on LED lights, cotton seeds, soyabean meal, soyabean seeds, raw cotton, ginning cotton, plant, machinery, packaged flavoured milk, cream, yogurt, poultry machinery, and many other items.

Senator Saadia Abbasi belonging to the PML-N, set the tone of the Senate panel, whereby, she asked the chairman of the Committee to write a dissenting note as she could not approve such highly inflationary tax proposals incorporated in the Finance Bill 2021-22.

“The government has hiked tax rates on 279 items and they do not have any realisation that this budget will make lives of common citizen more miserable. I am answerable to my conscious and to my party and cannot grant stamp approval on such tax proposals. These measures will kill the industry,” Senator Abbasi said during the Senate Standing Committee on Finance meeting, which continued its deliberation for second day (Wednesday) to finalise their recommendations for budget 2021-22.

This hard hitting stance was supported by Senator Saleem Mandviwala, Senator Kamil Ali Agha from the PML-Q, Senator Faisal Subzwari from MQM Pakistan, and Prince Umar Ahmed Zai from Balochistan Awami Party.

Senator Agha, belonging to the PML-Q, said that it seemed that Finance Minister Shaukat Tarin was not fully aware of the tax proposal and he might prefer to quit after fully knowing about such harsh taxation measures.

The FBR high-ups informed the committee that the exemption on glass bangles, infant milk, boats, aircraft, and other items were withdrawn in the budget.

The sales tax in value added mode was placed where the whole supply chain for various sectors was brought into the tax net, the FBR added.

The Federal Board of Revenue (FBR) further informed the Senate Standing Committee on Finance that the government has abolished all reduced sales tax rates on the non-essential and luxury items, which were taking undue advantage of the concessionary sales tax regime.

The FBR Member Inland Revenue (Policy) was responding to various queries of the members of the committee on the imposition of 17 percent sales tax rate on gold jewellery.

The Senate Standing Committee on Finance, unanimously, rejected imposition of 17 percent sales tax on gold.

The FBR Member informed the committee that the FBR has carried out the exercise for streamlining the rates of the sales tax, in cases, where certain sectors were taking undue advantage of the reduced sales tax rates.

In this regard, all non-essential items subjected to the reduced rates have been subjected to the standard rate of 17 percent sales tax.

“We have treated gold and jewellery as non-essential and luxury items for the purpose of imposing 17 percent sales tax. Therefore, the FBR will charge 17 percent sales tax on the sale of jewellery,” he remarked.

To a query why the FBR has imposed 17 percent sales tax on bicycles, the FBR Member stated that the FBR has re-visited the entire exemption schedule of the Sales Tax Act on the request of the donor agencies/developing partners.

The Sixth Schedule of the Sales Tax Act, 1990, is proposed to be streamlined and exemptions other than relating to basic food items, health and education are proposed to be withdrawn.

The shifting of goods from reduced rate (one percent, five percent, 10 percent, 12 percent) to standard rate (17 percent) silver/gold jewellery, fat filled milk, and LNG/RLNG will bring additional revenue, the FBR Member added.

The representatives of Islamabad Jewellers Association informed the Senate panel that the FBR slapped standard GST rate of 17 percent on gold, diamonds and precious stones in the budget.

Earlier, the FBR had imposed reduced GST rate of 1.5 percent on gold value, 0.5 percent for precious stones, and three percent for making services of jewellery.

Now the FBR proposed hiking of GST rate to 17 percent.

The FBR has also brought changes in 8th Schedule of GST and hiked GST rate on soyabean meal and soyabean seeds from 10 to 17 percent.

The rate of GST on raw cotton, ginning cotton, plant, machinery to 17 percent.

“This is [an] anti-industry move, and we will oppose it tooth and nail,” Senator Mandviwalla said.

Senator Faisal Subzwari said that he could not justify that the government was providing tax incentives on Capital Gain Tax (CGT) but imposing taxes on edible items.

The Chairman of the Senate panel, Senator Talha Mahmood, asked the FBR team to review tax proposals where the tax was jacked up on milk, cream, butter, yogurt, and poultry machinery.

The Senate panel also considered 12th schedule and recommended bringing down GST rate from 17 to one percent on electric vehicles (EVs).

The committee also endorsed bringing export of services at zero-rating regime for the Islamabad Capital Territory (ICT).

Copyright Business Recorder, 2021

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