Presidential Ordinance almost ready: New tax rates under FTS to be notified on Oct 1

ISLAMABAD: The upcoming Presidential Ordinance will notify new tax rates for trades under the fixed tax scheme (FTS) from October 1, 2022, and old tax rates (prior to budget 2022-23) will continue during July-September 2022.

Sources told Business Recorder that the Federal Board of Revenue (FBR) has almost finalized the Ordinance in line with the four major decisions were taken during the last meeting to finalize sales tax collection through electricity bills held at the ministry of finance to finalize collection of sales tax through electricity bills.

The old tax rates will continue during July-September 2022 to avoid revenue shortfall from the retail sector, sources said. The meeting was presided over by the Finance and Revenue Minister, Dr Miftah Ismail.

First, the fixed tax scheme introduced through Finance Act, 2022 will be rolled back ab initio and the retailers will continue to pay taxes as per the previous (pre-budget) mechanism and rates.

Second, for the next three months i.e. July to September 2022, the previous tax rates will continue to apply on the retailers. Third, the government will review the situation and will notify new tax rates effective from 1st October 2022

Small retailers: fixed tax regime rationalized

Fourth, for the reversal of the fixed tax scheme, necessary legislation will be enacted by the FBR as soon as possible.

Sources informed that the FBR has estimated revenue of Rs30 billion from the introduction of a new tax slab for small retailers under the Finance Act 2022. This amount would not be collected in 2022-23. Earlier, the government had projected revenue of Rs40 billion under the old scheme.

The retail tax payment through electricity bills was in the field since 2014, where under section 3(9) of the Sales Tax Act, 1990 the retailers having electricity bills up to Rs20,000 were liable to pay sales tax at the rate of 5% and bills exceeding Rs20,000 were liable to pay sales tax at the rate of 7.5 per cent through their electricity bills.

The government this year has only substituted earlier tax with the fixed rate of Rs3,000, Rs5,000, and Rs10,000 against electricity bills up to Rs30,000, Rs50,000, and over Rs50,000 respectively.

Furthermore, in the case of a non-active person, the retailer is liable to charge double the amount of the tax.

Copyright Business Recorder, 2022