ISLAMABAD: The share of sales tax on imports remained 56.4 percent, while domestic sales tax contributed 43.6 percent of the total sales tax collection during 2020-21.

According to the Federal Board of Revenue (FBR) biannual review issued Thursday, the FBR has recommended measures to enhance domestic share of sales tax collection for greater stability in revenue collection growth.

The net collection of sales tax domestic (STD) was Rs863.2 billion against Rs720.5 billion in the PFY and net collection grew by 19.8 percent.

In absolute terms, Rs142.6 billion higher revenue has been collected in FY 2020-21 as compared to previous fiscal year.

The collection in the first half recorded a growth of 6.6 percent, which increased to 44.4 percent in the second half of the FY.

Major chunk of collection of sales tax domestic, accounting for around 77 percent of total collection under the head comes from; petroleum products, electrical energy, sugar, cotton yarn, cement, cigarettes, food products, aerated water/beverage etc. Again, the narrow base of sales tax collection due to greater reliance on few items needs policy intervention.

FY21 direct taxes: FBR fails to achieve target

Policy, operations and broadening the tax base (BTB) wings need to review the existing base and to devise measures for expanding the sales tax for sustaining the current spike in revenue collection.

The FBR’s data revealed that the POL products, the top revenue generating source, with 34.9 percent share, have recorded 30.1 percent growth during 2020-21. Tax from electrical energy grew by 38.6 percent, sugar by 57.8 percent, cotton yarn by 71.2 percent, and cigarette by 37.2 percent.

The share of sales tax from imports in total sales tax net collection has reached around 57 percent during 2020-21.

The net collection of sales tax on imports during 2020-21 stood at Rs1,118.2 billion against Rs876.3 billion in FY 2019-20, registering a growth of 27.6 percent.

Among the 10 major revenue spinners in terms of sales tax at import stage (contributing 73.7 percent of total STM collection) more than 50 percent of STM is contributed by POL products, iron and steel, vehicles, machinery, and edible oil.

Like domestic sales tax, petroleum is the leading source of sales tax collection at import stage.

Its share in total sales tax imports is around 23 percent.

During FY 2020-21, collection from the POL products was Rs255.7 billion against Rs231.3 billion during FY 2019-20, reflecting a growth of 10.6 percent, the FBR added.

Copyright Business Recorder, 2021