ISLAMABAD (June 12 2008): The
government has increased
sales tax rate from 15 percent to 16 percent across the
board including provincial services; 15 percent to 21 percent in
excise duty on
telecommunication services; 5 percent excise duty imposed
on import/local supply of cars over 850cc, and enhanced
federal excise
duty (FED) from 5 percent to 10 percent on banking,
insurance and franchise services.
The Finance Bill 2008-09, released
by the Federal Board of Revenue (CBR) on Wednesday, shows that
the general amnesty has been granted from payment of past dues
on new sales tax registration by unregistered persons.
Sales tax zero-rating has been
extended on other items;
sales tax
exemption on
energy saver
lamps and rate of default surcharge has been increased from 1
percent to 1.5 percent to avoid short-filing of sales tax.
It said that the enhanced 16
percent sales tax would be applicable from July 1, 2008.
Interestingly, one percent special excise duty (SED) would
remain continue on import and local supply stages.
Tax incentives have been offered to
agriculture sector for providing impetus, and a big powerful
push to this potential sector. Sales tax exemption is given on
the import and local supply of fertilisers/pesticides and
exemption of 5 percent FED on
crop insurance
premium.
As general, the rate of sales tax
is being enhanced from 15 percent to 16 percent, thus the same
rate should be applied on the goods and services subject to FED
in sales tax mode.
The FED on cement has been
increased from Rs 750 per ton to Rs 900 per ton, and FED at the
rate of 5 percent has been levied on import as well as locally
manufactured cars having engine capacity exceeding 850cc.
The government has brought all
telecommunication services into the FED net. In order to bring
the remaining telecommunication services in the tax net, all
telecommunication services has been being subjected to FED,
except those which are already exempt.
Due to revenue crunch, the rates of
sales tax and FED have been increased from 15 percent to 16
percent. As sales tax on provincial services is charged under
the Sales Tax Act, 1990, all provinces have been requested to
increase the rate of sales tax on Provincial services from 15
percent to 16 percent.
In order to provide level playing
field to the manufacturers of medical equipment, apparatus,
reagents, disposables and spares, exemption of sales tax on
these items is being granted on their supply to operating
hospitals of 50 beds or more.
Acetic acid
is used extensively in the textile industry, which is
zero-rated. To save the manufacturers of acetic acid from the
hassle of refunds, its raw materials, including molasses, have
also been zero-rated. To further facilitate the export-oriented
zero-rated sectors,
caustic soda
flakes/solid, cotton linter and sequins are being zero-rated.
The Finance Bill also provides
compensation for AJK government, enabling it to pay refunds to
the registered persons of AJK buying taxable goods from
Pakistan. To enable AJK government to pay refunds to their
registered persons on purchase of taxable goods from Pakistan, a
provision is being introduced in sales tax law to pay sales
tax refunds
to persons registered in AJK.
Copyright Business Recorder, 2008
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