The government may impose 17 percent sales tax on some specific sectors and 5 percent lower rate of sales tax on a wide range of items/sectors in budget (2015-16) that includes different kinds of machinery/equipment, ginned cotton, poultry feed and lead supplied to manufacturers of lead batteries.
Sources said on Tuesday that the Federal Board of Revenue (FBR) has laid down principles for review of sales tax concessions under Statutory Regulatory Orders (SROs) to be phased out in budget (2015-16). The principles are concessions for socially sensitive sectors to be retained by incorporating them into Sixth Schedule to the Sales Tax Act.
Secondly, the concessions to all other sectors to be withdrawn by charging standard rate of sales tax over the next 03 years. In case the import value is less than or equal to Rs 30 million annually, sales tax concessions may be withdrawn with immediate effect.
One of the proposals under consideration is to convert status of zero-rating to the exemption on items such as dairy products; bicycles and stationary.
Five percent sales tax is under study on the poultry feed and cattle feed including their all ingredients except soyabean meal of Pakistan Customs Tariff (PCT) heading 2304.0000 and oil-cake of cottonseed falling under PCT 2306.1000; incinerators for disposal of waste management, motorised sweepers and snow ploughs and re-importation of foreign origin goods which were temporarily exported out of Pakistan are subject to similar conditions as envisaged for the purposes of applying zero-rate of customs duty (PCT 9918).
The government may impose 5 percent sales tax on local supply of reclaimed lead, if supplied to recognised manufacturers of lead batteries and ginned cotton.
Some sectors are proposed to be charged to standard rate of sales tax. Standard rate of 17 percent sales tax may be applicable on imports by Karachi Shipyard and engineering works Ltd; setting up of hotels, power generation plant, water treatment plants in Gwadar and machinery, equipment and other apparatus meant for mines construction or extraction phases.
The government may impose reduced rate of 5 percent sales tax on 10 sectors in coming budget. Five percent sales tax has been proposed on machinery and equipment for marble, granite and gem stone extraction and processing industries; plant, machinery equipment and specific items used in production of bio-diesel and imports for BMR of desalination plants, coal firing system, gas processing plants and oil and gas field prospecting.
Five percent sales tax is under study on items with dedicated use or renewable source of energy like solar, wind, geothermal etc; items for promotion of renewable energy technologies; imports for power generation through gas, coal, hydel, and oil including under construction projects and imports for power generation through oil, gas, coal, wind and wave energy including under construction projects, which entered into an implementation agreement with the GoP.
The government may impose reduced rate of 5 percent sales tax on imports for power generation through nuclear and renewable energy sources like solar, wind, micro-hydel bio-energy, ocean, waste-to-energy and hydrogen cell etc and import for power generation and grid station including under construction projects.
Items may be subjected to standard rate of sales tax included Soyabean meal; oilseeds meant for sowing; ginned cotton (imported); plant and machinery not manufactured locally and having no compatible local substitutes.
The government may impose standard rate of sales tax on directly reduced iron; items imported by call centres, business processing outsourcing facilities duly approved by telecommunication authority; proprietary formwork system for building/ structures of a height of 100 ft and above and its various items/ components like plastic tube, plastic tie slot filters/ plugs, plastic cone, standard steel ply panels etc.
Items under consideration for imposition of standard rate of sales tax included machinery and equipment for development of grain handling and storage facilities; cool chain machinery and equipment; machinery, equipment, materials, capital goods, specialised vehicles accessories, spares, chemicals and consumables meant for mineral exploration phase; construction machinery, equipment and specialised vehicles, excluding passenger vehicles, imported on temporary basis as required for the exploration phase; complete plants for relocated industries and machinery, equipment and other capital goods meant for initial installation, BMR of oil refining petrochemical and petrochemical downstream products including fibers and heavy chemical industry, cryogenic facility for ethylene storage and handling.
SRO 1125(1)/2011 extends concession of reduced rate of sales tax (2-5 percent) on specified raw materials, primary and intermediate inputs, finished goods to major sectors/ beneficiaries, ie, five export oriented sector including leather, textile, carpets, sports goods, surgical goods. These sectors may be charged to reduced rates of 5 percent adjustable; supply of electricity and gas to the registered manufactures of export goods may be charged @ 5 percent from existing 0 percent.