- Local supply of medicines may be sales tax zero-rated, but the import of raw materials could be made taxable
ISLAMABAD: The government may impose 17 percent sales tax on the import of various kinds of plant, machinery/equipment, mobile phones, computers, and raw materials used in the manufacturing of pharmaceutical products, but local supply of medicines would be sales tax zero-rated.
Sources told Business Recorder here on Tuesday that the local supply of medicines may be sales tax zero-rated, but the import of raw materials could be made taxable.
The Ninth Schedule (Mobile Phones); Eighth Schedule (Conditional sales tax exemption) and the Sixth Schedule (Exemption) of the Sales Tax Act 1990 would be minimised and only few entries would be left in the said schedules.
The FBR will eliminate all zero-rated goods (Fifth Schedule), except on export and capital machinery goods and move them to the standard rate of 17 percent sales tax rate.
The FBR will eliminate exemptions (Sixth Schedule) excluding a small subset of goods (i.e., basic food, medicines, live animals for human consumption, education and health-related goods) and bring all others to the standard rate of 17 percent.
Similarly, the FBR will remove reduced rates under the Eight Schedule and bring all those goods to the standard sales tax rate.
The Ninth Schedule of the Sales Tax Act may not be completely abolished, but some phones would be subjected to the standard rate of 17 percent sales tax.
The Third Schedule items would be retained on which sales tax has been charged on the basis of printed retail price.
The revenue impact of the said withdrawal of sales tax exemptions is nearly Rs350 billion under the Tax Laws (Fourth) Amendment Bill, 2021.
Tax Laws (Fourth) Amendment Bill 2021 would retain few exemptions under the Sixth Schedule (Exemption) of the Sales Tax Act, 1990.
Some sales tax exemptions to be retained included import and supply of construction materials, machinery, equipment and materials to Gwadar Export Processing Zone’s investors and Export Processing Zone Gwadar or other Export Processing Zones.
Exemptions available to the Chinese companies under the CPEC may also be retained after issuance of the Tax Laws (Fourth) Amendment Bill, 2021.
The exemption may continue on the import of plant, machinery, equipment and raw materials for consumption of these items within Special Technology Zone by the Special Technology Zone Authority, zone developers and zone enterprises.
The exemption would be retained on the import of raw materials, components, parts and plant and machinery by registered persons authorised under Export Facilitation Scheme, 2021.
Under the Eighth Schedule (Conditional sales tax exemption) of the Sales Tax Act 1990, the sales tax may be imposed on the LPG; import of re-meltable scrap; silver, in unworked condition; gold, in unworked condition and articles of jewelry, or parts thereof, of precious metal or of metal clad with precious metal; incinerators of disposal of waste management, motorized sweepers and snow plough; plant and machinery not manufactured locally and having no compatible local substitutes; ingredients of poultry feed, cattle feed; re-importation of foreign origin goods which were temporarily exported out of Pakistan; plant, machinery, and equipment used in production of bio-diesel; second hand and worn clothing or footwear; agricultural tractors; tillage and seed bed preparation equipment and post-harvest handling and processing and miscellaneous machinery and some other items specified in the Eighth Schedule of the Sales Tax Act, 1990.
Sales tax may be imposed on the import of plant, machinery and production line equipment used for the manufacturing of mobile phones by the local manufacturers of mobile phones; laptop computers, notebooks whether or not incorporating multimedia kit and personal computers; sunflower and canola hybrid seeds meant for sowing and combined harvesters upto five years old.
Sales tax could be imposed on the import of live animals and live poultry; meat of bovine animals, sheep and goat; fish and crustaceans; eggs including eggs for hatching; live plants including bulbs, roots and the like; edible vegetables including roots and tubers; pulses; edible fruits; red chillies excluding those sold in retail packing bearing brand names and trademarks; ginger excluding those sold in retail packing bearing brand names and trademarks; turmeric excluding those sold in retail packing bearing brand names and trademarks; cereals and products of milling industry; seeds, fruit and spores of a kind used for sowing; Cinchona bark and sugar cane.
Sales tax may be imposed on the import of journals, periodicals and books; currency notes, bank notes, shares, stocks and bonds; goods (including dry fruits imported from Afghanistan) temporarily imported into Pakistan, meant for subsequent exportation charged to zero-rate of customs duty; import of ship stores; personal wearing apparel and bona fide baggage imported by overseas Pakistanis and tourists, if imported under various baggage rules and is exempt from Customs duties; goods and services purchased by non-resident entrepreneurs and in trade fairs and exhibitions subject to reciprocity and such conditions and restrictions as may be specified by the Board; uncooked poultry meat whether or not fresh, frozen or otherwise, preserved or packed; cotton seed; preparations suitable for infants, put up for retail sale; colors in sets(poster colors); writing, drawing and making inks; erasers; exercise books; pencil sharpeners; sewing machines of the household type; other drawing, marking out or mathematical calculating instruments (geometry box); pens, ball pens, markers and porous tipped pens; pencils including color pencils.
Sales tax may be imposed on the items with dedicated use of renewable source of energy such as solar and wind including solar PV panels; LVD induction lamps; SMD, LEDs, with or without ballast, with fittings and fixtures; wind turbines including alternators and mast; solar torches and lanterns and related instruments.
Exemption may be withdrawn on the import and local supply of fish feed; fans for dairy farms; bovine semen; preparations for making animal feed; promotional and advertising material and oil cake and other solid residues, whether or not ground or in the form of pellets.
The government may impose 17 percent sales tax on the local supply of raw material and intermediary goods manufactured or produced, and services provided or rendered, by a registered person, consumed in-house for the manufacture of goods subject to sales tax.
The local supply of fixed assets; single cylinder agriculture diesel engines (compression-ignition internal combustion piston engines); Sprinkler equipment; Drip equipment; Spray pumps and nozzles and match boxes may be subjected to standard rate of 17 percent sales tax.
Sales tax zero-rating may be abolished on the goods and the raw materials, packing materials, sub-components, components, sub-assemblies and assemblies imported or purchased locally for the manufacture of preparations suitable for infants, put up for retail sale; bicycles; colors in sets; writing, drawing and marking inks; erasers; exercise books; pencil sharpeners; geometry boxes; pens, ball pens, markers and porous tipped pens; pencils including color pencils; supply, repair or maintenance of any ship which is neither; (a) a ship of gross tonnage of less than 15 LDT; nor (b) a ship designed or adapted for use for recreation or pleasure; supply of spare parts and equipment for ships and supply of equipment and machinery for salvage or towage and supply of equipment and machinery for other services provided for the handling of ships in a port.
Copyright Business Recorder, 2021