ISLAMABAD: Despite withdrawal of sales tax exemption on jewellery under the Finance (Supplementary) Act, 2022, there is no change in income tax and concessionary withholding tax regime for the jeweller’s community.
A meeting of the National Assembly Standing Committee on Finance and Revenue was informed on Wednesday that there is no change in taxation of jewellers in the Income Tax Ordinance, 2001.
The meeting presided over by Faizullah on Wednesday was informed that the sector continues to avail concessionary reduced rate of withholding tax on import of unwrought or semi-manufactured gold at one percent, whereas, other industrial raw materials are generally subject to tax at import stage at two percent.
However, in the Finance (Supplementary) Act, 2022, the sales tax exemption and reduced rates on import and local sales of articles of jewellery have been withdrawn and these articles are now chargeable to sales tax at standard rate of 17 percent.
He apprised that the exemption was withdrawn under the IMF programme to remove economic distortions created by tax exemptions and reduced rates. Monetary gold; however, is still exempted at both import and local sales stages.
He informed that the sector is also exempted from levy of value addition tax at three percent at import stage. During the course of discussion, the vice chairman, Jewellers Association said that the sale of jewellery is liable to tax at1.5 percent on gold, three percent on making and two percent on value of diamonds. However, the Finance (Supplementary) Bill proposes to increase it to normal rates i.e., 17 percent.
He informed that out of approximately 36,000 jewellers only 50 plus are registered with sales tax, and such a harsh measure would result in complete closure of this documented sector and fall in revenue. He also informed that in the history, even when reduce rate was not there, the exemption was available up-to 90 percent of the value.
Similarly, jewellery across the globe is taxed at reduced rates i.e., the rate of VAT on jewellery is three percent in India. He further informed that sales tax registered jewellers have to pay withholding tax at nine percent as all the suppliers in the supply chain are un-registered and out of tax net.
The Committee asked directed the vice chairman, Jewellers Association to make proposals for viable solutions to register jewellers with sales tax. The Committee also directed the FBR to reduce the withholding tax to 0.25 percent and the Ministry of Commerce to revise the import policy, so that gold could be imported.
Copyright Business Recorder, 2022