The cost of tax exemptions would witness a major decrease in 2011-12 following continuation of the taxation measures taken on March 15, 2011 including withdrawal of exemption on tractors, pesticides, fertilisers and revamping of zero-rating regime for five export sectors.
Sources told Business Recorder here on Tuesday that the cost of sales tax exemption would be further reduced during current fiscal following continuation of taxation measures taken in last March 15, 2011. The revenue collection of Rs 105 billion in July 2011 reflects that the cost of exemption has started going down during the 2011-2012.
Previously, sales tax exemptions were on tractors, fertilisers, pharmaceuticals, pesticides etc. However, the federal government rationalised the extent of exemptions and from March 15, 2011 onwards, tractors, pesticides and fertilisers were chargeable to sales tax. The cost of sales tax exemptions was Rs 25.323 billion for the fiscal year 2010-11.
The latest quarterly review of the Federal Board of Revenue (FBR) revealed that total tax exemptions to various sectors, industries and investors have cost the government Rs 166.772 billion during 2010-2011 against Rs 150.291 billion in 2009-10, reflecting an increase of Rs 16.481 billion.
The FBR data revealed that the sales tax exemption was Rs 25.323 billion in 2010-2011 against Rs 27.409 billion in 2009-2010; income tax, Rs 46.508 billion against Rs 46.534 billion and cost of custom duty exemption was Rs 94.941 billion in 2010-11 against Rs 76.348 billion during the corresponding period of last fiscal.
Followings are the main exemptions in sales tax and their cost of exemptions during 2009-10 and 2010-11: The revenue loss on account of exemption to pharmaceutical products is Rs 4.129 billion in 2010-11 against Rs 3.754 billion in the same period last fiscal. Exemptions to tractors caused a loss of Rs 4.867 billion against Rs 6.246 billion; fertilisers, Rs 6.854 billion against Rs 8.797 billion and exemptions to items falling within the category of 'others' caused a loss of Rs 9.473 billion against Rs 8.612 billion in 2009-10.
The cost of income tax exemptions was Rs 46.508 billion in 2010-11 against Rs 46.534 billion during the period under review. The FBR quarterly review further disclosed that the government has also suffered a loss Rs 0.870 billion in 2010-11 against Rs 0.852 billion in 2009-10 due to income tax exemption available to Independent Power Producers.
The income tax exemption to pensioners cost Rs 0.087 billion in 2010-11 against Rs 0.075 billion in 2009-10; income from funds, board of education, universities and computer training institutions Rs 0.979 billion against Rs 0.950 billion; donations and contributions to charitable organisations Rs 0.649 billion against Rs 0.630 billion; income from certain trusts, welfare and charitable institutions and non-profit organisations Rs 1.360 billion against Rs 1.350 billion; profits on debt/interest from government securities and certain foreign currency accounts/books/profits on debt earned by certain non-residents individuals and institutions Rs 0.049 billion against Rs 0.050 billion; export of Information Technology Rs 0.724 billion against Rs 0.812 billion and other sector and enterprise specific exemption caused revenue loss of Rs 19.905 billion in 2010-2011 against Rs 19.905 billion in 2009-10.
The customs duty related notifications caused an accumulative loss of Rs 94.941 billion in 2010-2011 against Rs 76.348 billion in 2009-10. The FBR quarterly review showed that the concession of customs duty on goods imported from Saarc and ECO countries caused revenue loss of Rs 0.073 billion in 2010-2011 against Rs 0.104 billion in 2009-10. The customs duty exemption on the imports from Sri Lanka resulted in revenue loss of Rs 0.148 billion against Rs 0.152 billion.
The customs duty exemption on the imports from China under SRO.1296(I)/2006 caused revenue loss of Rs 0.031 billion during 2010-11 against Rs 0.073 billion in 2009-10. The customs duty exemption on the imports from Iran under Pak-Iran PTA caused loss of Rs 0.004 billion against Rs 0.005 billion. The customs duty exemption on the imports under the Safta agreement caused revenue loss of Rs 0.116 billion during 2010-11 against Rs 0.090 billion in 2009-10.
The exemption of customs duty on the imports from China under another SRO.659(I)/2007 resulted in revenue loss of Rs 10.867 billion in 2010-11 against Rs 6.069 billion during 2009-2010. The customs duty exemption on the imports from Malaysia caused revenue loss to the tune of Rs 2.895 billion during 2010-2011 against Rs 2.221 billion in same period previous fiscal.
The FBR quarterly review further revealed that the conditional exemption of customs duty on import of raw materials and components etc for manufacture of different sectors resulted in revenue loss of Rs 4.653 billion in 2010-11 against Rs 4.315 billion during the corresponding period last fiscal. The general and conditional exemption of customs duty under SRO.567(I)/2006 cost revenue loss of Rs 30.277 billion in 2010-11 against Rs 22.566 billion in 2009-10.
Similarly, exemption of customs duty and sales tax on the import of machinery by the oil Exploration and Production (E&P) companies (SRO.678(I)/2004) caused a loss of Rs 2.581 billion against Rs 4.831 billion in the same period last fiscal. The concession of customs duty on the import of machinery, equipment and apparatus resulted in revenue loss of Rs 13.712 billion during 2010-11 against Rs 11.980 billion during 2009-10 in the same period last fiscal.
The exemption of customs duty for vendors of automotive sector caused revenue loss of Rs 9.315 billion during 2010-11 against Rs 4.933 billion in the corresponding period of last fiscal. The exemption of customs duty for OEMs of automotive sector caused revenue loss of Rs 19.073 billion during 2010-11 against Rs 18.378 billion in 2009-10. The exemption of customs duty on the import of machinery and equipment by industrial units registered with the Ministry of Textile Industry caused revenue loss of Rs 1.196 billion against Rs 0.630 billion in 2009-10, the FBR quarterly review added.