ST levy on basis of per printed retail price: Scope of Third Schedule of ST Act to be expanded

RECORDER REPORT

ISLAMABAD: The government is planning to insert cement, fertilizers, lead batteries and bottled water in the Third Schedule of the Sales Tax Act 1990, so that sales tax be charged on the basis of printed retail price for generating maximum possible revenue from next fiscal year (2012-13).

Sources told Business Recorder here on Monday that the Federal Board of Revenue (FBR) has decided to expand the scope of the Third Schedule of the Sales Tax Act 1990 in budget (2012-13) by including cement, fertilizers, lead batteries and bottled water for imposition of the sales tax on the basis of printed retail price from upcoming fiscal year.

According to the FBR proposal received by the Ministry of Finance for budget (2012-13), the sales tax to be charged on the basis of printed retail price from cement, fertilizers, bottled water and lead batteries sectors. This would increase sales tax collection from the said sectors in next fiscal.

Presently, items chargeable to sales tax at the retail stage included fruit juices and vegetable juices, ice cream, aerated water or beverages, syrups and squashes, cigarettes, toilet soap, detergents, shampoos, toothpastes, shaving creams, perfumery and cosmetics, tea, powder drinks, milky drinks, toilet papers and tissue papers, spices sold in retail packing bearing brand names and trade marks and shoe polish and shoe cream. The FBR has decided to expand the scope of the Third Schedule of the Act by including cement, fertilizers, lead batteries and bottled water in the next budget.

Sources informed that manufacturers of third schedule items are required to pay sales tax on all the stages of value addition of consumer items on the basis of printed retail price. Under the Value Added Tax (VAT) regime, the tax is to be paid on value addition attributed to each stage, starting from manufacturing down to retail sale to the end consumer. In Pakistan entire tax chain is not yet in the ambit of sales tax regime and large number of dealers, distributors and wholesalers of different consumer items are still out of tax net despite all out efforts to make the intermediary supply chain part of the taxation system, resultantly the tax actually chargeable at each stage on value addition is not being recovered.

It is expected that the sales tax collection from cement, fertilizers, bottled water and lead batteries sectors would increase in 2012-13 after including these items in the Third Schedule of the Sales Tax Act 1990.