ISLAMABAD: The Federal Tax Ombudsman (FTO) has strongly recommended the Federal Board of Revenue (FBR) to consider sales tax exemption on local sales of bun and rusk in the coming federal budget to facilitate poor people of the country.
The abovementioned complaint was filed in terms of Section 10(1)of the Federal Tax Ombudsman Ordinance, 2000 (FTO Ordinance) on the failure of the FBR to issue clarification related to taxability atta reduced rate of rusks, buns, raisin buns and sheermal placed under the eighth schedule to the Sales Tax Act 1990 (the Act) through the amendment under Finance Act 2024.
Briefly, the complainant is an advocate by profession and seeks clarification for his clients related to the taxability of rusks, buns, raisin buns, and sheermal under a reduced rate @ 10 per cent as per amendment through Finance Act 2024, whereas, similar items i.e.; all types of bread, naan and chapattis are exempt from sales tax under section 13(1), Sixth Schedule, Table 2, Entry no54 to the Sales Tax Act.
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According to an order of the FTO issued on Tuesday, failure of the department to issue a clarification despite several requests by the complainant on the taxability of basic items of necessity like bread, bun, rusk, naan, and roti is tantamount to maladministration under Section 2(3) (ii) of FTO Ordinance.
The FBR will direct the Member (Tax Policy) FBR to respond to the clarification sought by the complainant on the taxability of basic items of necessity like bread, bun, rusk, naan, roti etc and the correct method for reporting sales of these products in sales tax returns to ensure compliance with the relevant provisions of law, the FTO order maintained.
The FBR should examine allowing the exemption from sales tax on local sales of bun and rusk in the budget proposal for 2025, the FTO order added.
In short, the complainant seeks clarification on the intended tax treatment of different kinds of bread items particularly overlapping between Table-2 to the Sixth Schedule and Entry 87 of Table-I to the Eight Schedule to the Act and the correct method for reporting sales of these products in sales tax returns to ensure compliance with the provisions of law.
Moreover, as per the “Macro Poverty Outlook for Pakistan”, released by the World Bank on 09.02.2025, limited growth in real wages and employment will keep the poverty rate near 40 percent through the fiscal year 2026. At the same time, monetary poverty will remain high. It can be observed everywhere in cities, the daily wage workers/laborers start their day consuming bun or rusk and a cup of tea in the morning. Therefore, the FBR may consider the reversal of taxability of items like bun, rusk etc which are basically forms of bread and consumed by the lower strata of the population for their survival, in the budget proposal of 2025, the FTO added.
Copyright Business Recorder, 2025
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