ISLAMABAD: The government has decided to retain sales tax exemptions on electric vehicles and kits imported by local manufacturers of electric cars under the Tax Laws (Fourth) Amendment Bill, 2021.
The Federal Board of Revenue (FBR) has also decided to retain sales tax exemption on the import of plant, machinery and equipment imported for setting up industries in erstwhile FATA subject to the same conditions and procedure as are applicable for import of such plant, machinery and equipment under the Customs Act, 1969.
It is learnt that the government has decided not to impose 17 percent sales tax on electric vehicles.
Sales tax exemption would be retained on the import of CKD (in kit form) of following electric vehicles (4 wheelers) by local manufacturers till June 30, 2026: (i) Small cars/SUVs with 50 Kwh battery or below; and (ii) Light commercial vehicles (LCVs) with 150 kwh battery or below.
Sales tax exemption would be retained on the import of CKD kits by local manufacturers of following electric vehicles: (i) Road tractors for semitrailers (electric prime movers) 8701.2060, (ii) Electric buses, (iii) Three wheeler electric rickshaw 8703.8030, (iv) Three wheeler electric loader 8704.9030, (v) Electric trucks 8704.9059, and (vi) Electric motorcycle.
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 would also be retained after issuance of the Tax Laws (Fourth) Amendment Bill, 2021.
The sales tax exemption would 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.
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.
Copyright Business Recorder, 2021