FBR to levy 5% Sales Tax on Local Sales for Zero-rated Sectors in Karachi

The Federal Board of Revenue (FBR) has agreed to levy sales tax (ST) at 5 percent on local sales for the five zero-rated industries.

The FBR is considering removal of sales tax on machinery and a scheme of postdated cheque is under consideration with the help of Federation of Pakistan Chamber of Commerce and Industry (FPCCI).

Salman Siddique, Chairman FBR during a meeting with FPCCI members said FBR would prescribe minimum documentation to be carried by the truckers during transportation of goods to upcountry to avoid harassment by intelligence staff.

Salman agreed to accept the FPCCI valuation certificate and share the data with FPCCI, saying suitable amendments would be made in SRO 283 with the help of FPCCI representatives.

The change in SRO 283 will bring only one rate of 5 percent without conditions within the scope of 5 export-oriented industries. Salman said the issues of buyer's responsibility for any irregularity or unlawful activity of his supplier would also be resolved with the help of FPCCI representatives.

He agreed to examine the valuation of consignment within prescribed time limit under section 81. Correction of sales tax return without sales tax official would also be considered, tax on tax at import and supply stages would be reviewed, deduction of withholding tax on export of rice would be revisited. He disclosed PACCS would continue, whereas duty on dyes would be levied at uniform rate. Dawood Usman Jakhura, acting President of FPCCI urged to define the mechanism for refund of sales tax paid on import of machinery and early implementation of Afghan Pakistan Transit Trade agreement.

Tariq Sayeed, Vice President CACCI highlighted the problems being faced by the importers due to raid on their cargos during their transportation from Karachi to upcountry. He proposed that a separate head at FBR deal the sales tax and income tax matters.

Shakil Ahmed Dhingra, Chairman Liaison with FBR said removal of section 8a from sales tax act as section 3aa binds the buyers to pay the amount of goods as well as sales tax to the buyer.

He offered if the buyer is allowed to pay the value of goods to the buyers with challan of payment to sales tax value only then buyer can be held responsible. He said if such goods are sold to unregistered buyers, they have to pay 5 percent sales tax — "then how is it possible to charge 16 percent for registered buyers," he expressed surprise.

He also reiterated that the decision already taken on section 81 of Customs Act where the provisional assessment if not implemented within 90 days, the declaration of importers becomes final.

FPCCI discussed the policy matters related to the denial of input sales tax refund/credit U/S 21 (3) and 8(A), allowing condonation of time limit to sales tax officials, allowing revising of sales tax return without permission of the sales tax authority, separation of tax judicial/adjudication system from administration, levying of income tax after excluding sales tax and federal excise, problem faced by the tax payers regarding levy of sales tax on supply of five export-oriented industries to registered and unregistered person.