NA body informed: sales tax imposition at import stage under EFS likely

ISLAMABAD: Federal Board of Revenue (FBR) Member Inland Revenue Najeeb Ahmad on Thursday disclosed before the National Assembly Standing Committee on Finance that the sales tax is likely to be imposed on the import of raw materials/inputs used in the export of finished goods under the Export Facilitation Scheme (EFS) in coming budget (2025-26).

This budget proposal of the FBR has been disclosed by FBR Member IR Policy during the meeting of the National Assembly Standing Committee on Finance on Thursday.

The FBR Member informed that there is a likelihood of imposition of sales tax at the import stage under the EFS. This proposal was overlooked during last year budget finalisation exercise. The International Monetary Fund (IMF) wants standardisation of sales tax rates and abolition of lower rates or special tax regimes for all sectors.

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Last year, sales tax zero rating on local supplies to registered exporters authorised under Export Facilitation Scheme, was withdrawn through Finance Act, 2024. He stated that Prime Minister’s Committee on Export Facilitation Scheme (EFS), headed by Federal Minister for Planning and Development Ahsan Iqbal has also submitted recommendations on the EFS.

On the proposal of exporters to restore final tax regime, FBR Member stated that the IMF would not allow restoration of Final Tax Regime (FTR) for exporters, FBR Member said.

FBR Member said that the IMF had objected last year about special tax treatment to exporters as compared to other sectors which are paying standard rate of corporate tax. Therefore, the special class of taxpayers (exporters) were brought under the normal tax regime.

Responding to this, Naveed Qamar MNA objected that bringing exporters under the normal tax regime does not allow double taxation on exporters. This kind of double taxation to impose minimum tax regime as well as normal tax regime on exporters is not justified.

Karachi Chamber of Commerce and Industry (KCCI) President, Muhammad Javed Balwani informed the committee that the exporters are paying taxes from 29 percent to 45 percent under normal tax regime.

The shift from a one percent turnover-based FTR to the standard taxation at 29% of taxable profit has increased the tax burden and compliance requirements for exporters. This disrupts the ease of doing business, reduces transparency, and affects the competitiveness of export-oriented businesses.

He said that the small and medium exporters are vanished from the market due to high tax rates and financial cost of business. “We do not have any cash flow to do business. The refunds under “FASTER” system are paid in months against declared time of 72 hours,” he stated.

The last budget removed zero-rating on local supplies for exporters under the Export Facilitation Scheme (EFS), increasing their cost burden significantly. Additionally, the withdrawal of Regional Competitive Energy Tariffs (RCET) has raised utility rates (power and gas), he added.

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