The Finance Bill 2011-2012 would impose 17 percent sales tax on a wide range of goods, including computer software, mineral oil, CNG kits, ambulances and agricultural machinery, equipments and implements and CNG buses (fitted with CNG kits) from next fiscal year.
Sources told Business Recorder here on Tuesday that one of the major revenue measures to be taken in the budget would be enhancement in the rate of value-addition for commercial importers. It is proposed that the rate of sales tax on value-addition should be increased at the import stage. The special procedure for commercial importers would be amended to increase the rate of value-addition tax from 2 percent to 3 percent. However, this tax will be adjustable, but will not be refundable.
According to sources, the Ministry of Finance and the Federal Board of Revenue (FBR) have finalised the list of items on which sales tax and federal excise duty exemptions would be withdrawn in the budget for 2011-2012. In this regard, 15 items of the Sixth Schedule (Exemption Schedule) of the Sales Tax Act 1990 would be deleted for withdrawal of exemptions.
A separate list of items has been finalised on which sales tax zero-rating facility would be withdrawn from next fiscal year. Tax authorities and senior officials of the Finance Ministry have agreed on the withdrawal of the said exemptions and zero-rating, subject to the final approval of the Federal Cabinet on budget day. Apparently, the budget makers have dropped the idea of imposing 17 percent sales tax on poultry and cattle feed, including all their ingredients, as the final list has not mentioned imposition of sales tax on these items, sources added.
Finance Bill 2011-2012 would also withdraw sales tax zero-rating facility on a number of items, including dedicated CNG buses (CBU or CKD), trucks, dumpers, prime movers and road tractors (CBU or in kit form) for trailers and semi-trailers, etc. The 17 percent sales tax would also be imposed on the import and supply of polyethylene and polypropylene for manufacture of mono-filament yarn and net cloth.
The SRO-based sales tax exemptions would be withdrawn by imposing 17 percent sales tax on the import and local supply of CNG kits, cylinders, valves, etc, phosphoric acid, commercial catalogues and rock phosphate. Through Finance Bill, 17 percent sales tax would be imposed on imported mineral oil 97 percent (PCT heading 2710.0000), formulators or manufacturers of pesticides.
Sources said that 17 percent sales tax would be imposed on import and local supply of surgical taps, ultrasound gel, diapers, etc, aircraft, ships and their parts city management equipments (fire fighting, refuse management etc) and equipment used at ports (air and sea) for air navigation. The 17 percent sales tax would be imposed on equipment and machinery for pilotage, salvage or towage for use in ports or airports, equipment and machinery for air navigation and equipment and machinery used for services provided for handling of ships or aircrafts in a customs port or customs airport and spare parts and equipment for aircraft and ships.
The 17 percent sales tax would also be imposed on 'such plant and machinery' as is notified by the Federal Government in the official Gazette but if imported these shall be entitled to exemption from sales tax'. This exemption would remain no more valid from next financial year.
The local supplies of sugar are chargeable to reduced rate of sales tax @ 8 percent, as against 17percent at the import stage. In order to accord uniform treatment, it is proposed to levy federal excise duty (FED) @ 8 percent on the import and local supply of sugar with no sales tax on import as well as on local supply.
At present, the rate of excise duty on green leaf tobacco is Rs 5 per kg. Keeping in view less than expected inflow of tax revenue to capture the potential of this sector, it is proposed that the levy of excise duty may be doubled from Rs 5 to Rs 10 per kg. Finance Bill 2011-2012 would impose 17 percent sales tax on bricks, building blocks of cement and ready mix concrete blocks.
The zero-rating of sales tax would also be withdrawn by omitting different serial numbers and corresponding entries in SRO 549(I)/2008, dated June 11, 2008 and by rescinding SRO 1161(I)/2007, dated November 30, 2007 (zero-rating of raw materials for diapers of HS code 5601.1040) and SRO 811(I)/2009, dated September 19 2009, sources added.