ISLAMABAD: The government is planning to impose some kind of time-bound levy or additional income tax on the annual income/profits earned by the steel sector, pharmaceutical industry and other profit earning sectors and also raise the minimum tax from two to six percent on the import of edible oil in the budget (2022-23).
Sources told Business Recorder here on Friday that the government has decided to increase the rate of minimum tax from two to six percent on the import of edible oil in the next fiscal budget to increase the incidence of tax on this high profit earning sector.
It is reliably learnt that the rate of minimum tax for the steel sector would also be increased in the coming budget.
It is important to mention that the new levy would only be imposed on the sectors and industries earning huge profits and it would be imposed for a limited period.
Sources informed that the steel sector profits have been increased by 20-30 percent but they are not paying the due amount of taxes. Therefore, an additional income tax or levy has been proposed to be levied for 1-2 years on the annual income earned by the steel industry, pharmaceutical sector and other sectors earning windfall profits. The levy or additional income tax would be paid along with the filing of income tax returns. The levy would be time-bound and may be imposed for one year or two years period.
Sources said that the Federal Board of Revenue (FBR) is charging two percent minimum tax on the import of edible oil which is proposed to be increased to six percent from the next fiscal year. The profits in the edible oil sector are very high and they are earning huge profits, but the tax payments are constant or on the lower side.
Moreover, the benefit is not passed on to the consumers. The local sector is part of the un-documented economy. Therefore, the said rate of tax would be increased from two to six percent at the import stage.
The government has also decided that section 8B of the Sales Tax Act 1990 would be imposed on the edible oil sector and all the companies operating in the steel sector, however, the rate may be reduced from 90 percent to 85 percent for all sectors. The FBR has no intention to abolish/amend Section 8B of the Sales Tax Act 1990 in the coming budget (2022-23) to allow registered taxpayers to claim 100 percent input tax adjustment.
Under the section 8B of the Sales Tax Act, a registered person shall not be allowed to adjust input tax in excess of 90 per cent of the output tax for that tax period.
According to sources, major changes are expected on the customs side for the steel sector. The FBR is proposing measures at the import stage to change the import-related regime to check evasion in the said sector.
The minimum tax on the steel sector is expected to be increased from the next fiscal year, sources said.
Sources said the banking sector is paying four percent Super Tax. A proposal is under consideration to increase the rate of Super Tax on banks.
Copyright Business Recorder, 2022