ISLAMABAD: The amended Finance Bill 2022 is likely to restore adjustment facility of turnover tax for the documented steel sector and may reduce the rate of turnover tax from 1.25 percent to 0.50 percent from July 1, 2022 to avoid increase in steel prices in future.
Sources told Business Recorder here on Wednesday that the proposals are under consideration of the FBR during amendments proposed in the Finance Bill 2022. The proposals have also been taken up by the anomaly committee keeping in view serious implications of disallowing carry forward of excess turnover tax.
According to a communication to Finance Minister Miftah Ismail, the documented steel sector pleaded that the Finance Bill 2022 proposes to disallow taxpayer to carry forward excess turnover tax under section 113 of the Income Tax Ordinance, 2001. Hence making it more empirical that the turnover tax rate for different sectors be rationalized as a higher rate of the turnover tax would always result in higher value of turnover tax as compared to normal tax.
Resultantly, it will be treated as an expense adding to the inflation, which the country is so rampantly facing.
The steel sector has also approached Afaque Ahmad Qureshi co-chairperson Anomaly Committee-Business (Member Inland Revenue Policy, FBR) to resolve the anomaly.
Currently rate of turnover tax is 1.25% for general industries but exceptions for highly volume industries are numerously available.
Steel was being sold at a price of Rs 100,000 (excluding GST) around two years back and the average net profit before tax was around Rs 4,000 per ton, resulting in a turnover tax of Rs 1,250 per ton and a normal tax of around Rs 1,160 per ton. Both of which are relatively in near proximity to each other.
Furthermore, now steel is being sold at the price of Rs 180,000, whereas the average net profit per ton still remains to be Rs 4,000 per ton only, resulting in a turnover tax of around Rs 2,250 per ton and a normal tax of around Rs 1,160 per ton, clearly showing that turnover tax will always be greater than normal tax.
Similarly, the said dilemma of increased steel prices can also be witnessed from the increase in FBR minimum rates from Rs 83,000 in 2019-20 to 164,037 in 2021-22.
Based on above it is proposed that turnover tax for the steel sector may be reduced to 0.50%; as at the current rate of 1.25 percent steel sector would be exposed to a turnover tax of twice their normal tax amount, Pakistan Association of Large Steel Producers added.
Copyright Business Recorder, 2022