FBR mulls over abolishing sales tax special treatments

ISLAMABAD: The FBR is mulling over different options to abolish sales tax special treatments for various important sectors during the next budget.

The special tax treatments applicable on commercial importers, jewelers and wholesalers-cum-retailers, oil marketing companies (OMCs), chains of wholesale-cum-retail outlets, sectors availing zero-rating facility, cotton ginning/expelling units and collection and payment of sales tax on natural gas including Compressed Natural Gas (CNG), steel melting units, steel re-rolling units and ship breakers might be abolished.

The FBR has proposed to government to shift sectors operating under the Sales Tax Special Procedure Rules to relevant Schedules of the Sales Tax Act 1990. In other cases, the certain sectors would be made part of the schedules of the Sales Tax Act.

The special sales tax procedure that is applicable on collection and payment of Sales Tax on Natural Gas including Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) imported, produced, transmitted and supplied by gas well-head companies and gas transmission and distribution companies licensed under the Natural Gas Rules, 1960, including their distributors, dealers, sale agents, retailers or by any other person hereinafter called the "person" for the purposes of this Chapter and dealing in importation, production or distribution and supply of Natural Gas including Compressed Natural Gas and Liquefied Petroleum Gas. In case of supply of natural gas by a gas transmission and distribution company, the person responsible to charge, collect and deposit sales tax shall be the gas transmission and distribution company and the value for the purpose of tax shall be the total amount billed including price of natural gas, charges excluding the amount of late payment surcharge, rents, commissions and all duties and taxes, local, Provincial and Federal, but excluding the amount of sales tax as provided in clause (46) of section 2 of the Sales Tax Act.

The special sales tax procedure is applicable to all persons who make supplies from retail outlets to end consumers, including jewelers and wholesalers-cum-retailers, whether registered or not, who shall be deemed to be retailers in respect of such supplies and also to persons making supplies of electric power to retailers.

The Sales Tax Special Procedures Rules are also applicable on supplies of electric power and natural gas consumed by persons having industrial or commercial connections. Every person supplying electric power or natural gas, shall charge and collect extra tax at the rate notified by the Federal Government, from every consumer having an industrial or commercial connection, where the bill for a month is in excess of Rs15,000, and the consumer either has not provided his sales tax registration number to the supplier or his name is not shown as active on the Active Taxpayers List (ATL) maintained by the Federal Board of Revenue.

The Sales Tax Special Procedures Rules are also applicable to supply of sugar by the registered manufacturers of sugar to the Trading Corporation of Pakistan (TCP) for further supply or export thereof.

The Sales Tax Special Procedures Rules are also applicable on supply of sugar by the registered manufacturers of sugar to the TCP for further supply or export thereof.

The Sales Tax Special Procedures Rules are also applicable to steel melters and re-rollers operating on self-generation basis.

The Sales Tax Special Procedures Rules are also applicable on such chains of wholesale-cum-retail outlets, engaged in bulk import and supply of consumer goods on wholesale basis to the retailers as well as on retail basis to the general body of consumers.

In case the supplies are made by the wholesaler-cum-retailers to diplomats and diplomatic missions, the same shall be charged to sales tax at zero rate provided an exemption certificate issued by Ministry of Foreign Affairs is provided mentioning the description and quantity of goods to be purchased.