The Federal Board of Revenue is expected to announce an amnesty scheme for the textile units to be registered with the sales tax department after issuance of the amended zero-rating notification in next few days under the documentation drive.
Sources told Business Recorder on Monday that the amnesty scheme would be limited to the sales tax side and no questions would be asked about past sales tax transactions to ensure maximum registrations of the persons operating in the entire textile chain.
Presently, the All Pakistan Textile Mills Association (Aptma) is going through the points agreed between the FBR and the textile sector before issuance of the notification. Following approval of the Ministry of Finance, the notification for the zero-rated sectors including textile will be issued in the next few days. The FBR intend to issue the notification from April, 1 2011 for which the amended SRO has to be issued up to March 31, 2011. The FBR will also consider the input and comments of the Aptma on the decisions taken last Saturday on the SRO.
One of the most important salient features of the new procedure is the introduction of the amnesty scheme for the textile sector. The FBR will not raise any question about the past sales tax transactions or tax record. This would work as a major incentive for the textile sector for obtaining new sales tax registration. The incentive would encourage documentation and it is expected that the FBR will be able to register over one lakh more new taxpayers within the textile sector. The amnesty scheme with an objective to broaden the tax base and reduction in sales tax rate would not affect the government''s plan to generate additional Rs 53 billion in this fiscal year to achieve the annual target of Rs 1600 billion by the end of current fiscal. There are total 1, 31,000 registered taxpayers in Sales Tax side and this number could go up to 0.2 million with the introduction of this targeted amnesty scheme within short span of few months.
Sources said that the proposed scheme for specific sector would be announced for incentivizing them to come into tax net for achieving the desired results. Sources said that the net impact of the notification of textile sector would comes to around 10 percent which would be instrumental in raising revenue, but considerably increase sales tax registration.
According to sources, Ministry of Finance, FBR and the Aptma are principally agreed on the amendment in the zero-rating SRO. The notification is expected to be issued after vetting from Ministry of Law and Justice, which would be applicable from April 1, 2011.
Another important feature of the new scheme is that the FBR would not allow any kind of input tax adjustment or refund of sales tax on different stages of textile sectors subjected to 6 percent and 4 percent sales tax. Sources said that the registered persons who acquire goods at zero-rating shall pay sales tax at the rate of 4 percent on their supplies to retailers whether registered or not. Through the proposed mechanism, the FBR will charge 6 percent sales tax up to the stages of spinning.
The FBR will charge 4 percent sales tax at all stages subsequent to spinning stage in case the registered person sells goods to the un-registered buyers. The accumulative impact of sales tax would be 10 percent on the textile chain. The tax authorities and whole textile sector chain evolved consensus to reduce the GST rate from 17 percent to 10 percent for different stages on domestic sale. Sources said that the benefit of zero-rating would be available to notified goods useable for the textile sector. However, no special excise duty (SED) would be charged on the notified goods for the textile sector. These notified goods would either be liable to sales tax zero-rating or reduced rate of sales tax.
When contacted, an official of the Aptma stated that the FBR has finalised the points as per good intention to facilitate the textile sector. However, few legal and technical points have been drafted for the FBR before issuance of the relevant notification.