ISLAMABAD: Rs251 billion out of total Rs343 billion tax exemptions withdrawn in the Finance Supplementary Bill, 2021, tabled in the National Assembly, will be refunded/adjusted to the pharmaceutical sector, importers of capital machinery, raw materials, and local suppliers of 11 items.
When specifically asked by BR to indicate the amount of tax adjusted in the said sectors as input-output tax adjustments, the FBR official did not respond. The Federal Board of Revenue (FBR) has estimated to issue sales tax refunds and tax adjustments of over Rs251 billion to the pharmaceutical sector, importers of capital machinery, raw materials and local supplies of 11 items following withdrawal of sales tax exemptions of Rs343 billion.
Sources told Business Recorder here on Monday that out of Rs343 billion worth sales tax exemptions withdrawn through the Finance Supplementary Bill, 2021, refunds and tax adjustments would be available to the tune of Rs251 billion under an expeditious process. The pharmaceutical sector would be able to get refunds within one-week period under the new system.
On the pattern of FASTER refund system, the FBR will device a fast track refund system for the pharmaceutical sector, importers of capital machinery, raw materials and other refund claimants, on which, 17 percent sales tax has been imposed or zero-rated under the Finance Supplementary Bill, 2021.
Sources said that the purpose of speedy refund system is to ensure documentation and those who would not document themselves will not be entitled to refunds. The sales tax exemption to the tune ofRs160 billion has been proposed to be withdrawn from the pharmaceutical sector. However, the local supply has been proposed to be zero-rated. The pharmaceutical companies will file their returns to obtain expeditious payment of refunds within one-week period. The pharmaceutical firms have been equated with exporters for purposes of release of refunds within 72 hours.
Therefore, pharma companies will now be able to claim refunds on sales tax paid as input tax on packaging material, utilities etc, which they previously could not – having price tag of Rs35 billion. Sources said that the FBR has withdrawn sales tax exemption of Rs82 billion on the import of capital machinery.
This included machinery imported for power generation, power transmission, renewable energy such as solar, wind and transmission, mining and extraction of minerals, and CKD kits for single cylinder engines. The impact of withdrawal of exemptions would be mitigated through adjustments and refunds expeditiously of Rs82 billion.
Copyright Business Recorder, 2022