The Federal Board or Revenue has termed growth of 61.2 percent to meet the revenue collection target of Federal Excise Duty (FED) during 2019-20 as a herculean task for the tax machinery.
According to the Year Book (2018-19) issued by the Federal Board of Revenue (FBR) Wednesday, during 2018-19, the major sectors which contributed in Federal Excise Duty (FED) revenues were tobacco, cement, beverages, natural gas and edible oil and some of the services. The tobacco (cigarette) is the top source of FED collection with around 38% share in FED revenue. The collection from cigarettes grew by around 36% during FY 2018-19. The second major sector is the cement which contributes about 24% in FED revenue. The collection grew by just 6.7% during the period under review. Other three items which recorded a positive growth are edible oil (48%), Rapeseed, Colza and Mustard Oil (127.6%) and POL products (930.2%). On the other hand services, natural gas and vehicles recorded a negative growth which affectedly negatively the overall FED collection during FY 2018-19.
Nearly 94.6% of FED collection is realized from five items. The share of cigarettes has increased from 31.4% in FY 2017-18 to around 38.2% in FY 2018-19, whereas shares of cement, services, beverages have declined as compared to PFY. There is a high concentration of FED collection on very few items which is the matter of concern. Why the FED collection is lower from other sectors like gas, beverages and services? The concerned quarter needs to analyze the FED base, potential, current revenues in order to broad the base and optimize FED revenues from all the sectors as per their potential.
It is very important amid challenging FED target of Rs.384 billion for 2019-20 requiring a growth of around 61.2% in the collection. The FED wing has to respond accordingly to meet the challenging target, the FBR said.
It is expected that tax policy measures introduced in 2019-20 regarding FED will significantly improve collection in this area. The FBR would need to increase monitoring of FED production, especially cigarettes coming from non-tariff areas. It is also expected that implementation of Track and Trace System for tobacco products will also bolster FED collection from tobacco sector.
The report said that the sales tax collection from domestic stage (local sales) and imports witnessed a negative growth of 1.9 percent and 1.7 percent during 2018-19.
According to the Year Book (2018-19), within sales tax, the share of sales tax on imports was 55.5 percent and that of domestic sales tax was around 44.5 percent during 2018-19.
The overall net collection of Sales Tax Domestic (STD) was Rs 648.9 billion in 2018-19 against Rs 661.1 billion in 2017-19 and the net collection reduced by 1.9%. In absolute terms Rs 12.2 billion less amount of revenue was collected in 2018-19 as compared to 2017-18.
The report said that collection of sales tax domestic is concentrated in few commodities. The major commodities are petroleum products, electrical energy, withholding agents, sugar, cigarettes, cement, food products, aerated water/beverage, iron & steel products and motor cars, which shared around 70.1 percent of sales tax domestic revenue.
Sales tax on imports is a significant component of federal tax receipts. The share of sales tax imports in total sales tax net collection has reached around 55.5%. The net collection of sales tax imports during FY 2018-19 stood at Rs 810.4 billion against Rs 824.2 billion in FY 2017-18, registering a decline of 1.7%.
Top 10 commodities of sales tax import have contributed a major chunk, ie, 76.5% in sales tax imports collection. The detailed data indicates that more than 59.6% of sales tax imports is contributed by POL products, machinery, iron & steel and vehicles. Like sales tax (domestic), petroleum is the leading source of sales tax collection at import stage as well. Its share in sales tax imports is around 27.3%. During 2018-19 collection from POL products was Rs 221 billion against Rs 264 billion during FY 2018-19 reflecting a decline of 16.2 percent.
The report said that around 56% of customs duty collection has been contributed by 10 major commodities grouped in PCT Chapters. All the major revenue spinners, except vehicle, have exhibited positive growth in the collection during FY 2018-19. Vehicles (Non-Railway) the leading revenue spinner, contributed 11.6% to the customs duty during 2018-19.