ISLAMABAD: The Federal Board of Revenue (FBR) has sent a proposal to the Finance Ministry, seeking restoration of special excise duty (SED) on the import and local manufacturing of goods in the upcoming budget (2014-15).
The board expects revenue generation to the tune of about Rs8 to 10 billion from the SED in 2014-15 which had been imposed in the past.
The rate of the SED has yet to be finalised but in the past 2.5 percent SED was applicable. If the government intends to restore the old SED rate, it may range between 1 and 2.5 percent.
In 2007, the FBR imposed one percent SED on import and local manufacturing of goods. It issued SRO 655(I)2007 to levy SED on import and local manufacturing of goods specified in the First Schedule of the Customs Act, 1969. Later the rate was enhanced from one percent to 2.5 percent and it remained applicable for four fiscal years – 2007 to 2011.
In the budget of 2011-12, the government abolished 2.5 percent special excise duty with the view to reduce the quantum of taxation on all items including those used by the middle and lower middle class of population. It was enforced through amendment to Federal Excise Act, 2005 and withdrawn through SRO 655(I)/2007.
When the SED was imposed in 2007-2008, it was estimated to generate around Rs 16 billion. The amount of special excise duty was not made part of the value for assessment of customs duty, federal excise duty, sales tax or advance income tax in case of imported or locally manufactured goods. The SED paid at import or local supply stage on industrial inputs was adjustable against special excise duty chargeable on goods manufactured there from at local supply stage.
In the past, SED was not be applicable on vegetables, seeds, edible oil, POL products, natural gas LPG, electricity, phosphoric acid, pharmaceutical products, fertilisers, gold and silver, tin plate, computer hardware, bitumen, currency notes as well as items classified in Chapter 99 of Pakistan Customs Tariff and temporarily imported goods under the Duty and Tax Remission for Exports (DTRE) scheme.
Moreover, items on which sales tax is zero-rated was applicable were not liable to special excise duty. In this regard, the Board has specified the list of all SROs relating to zero-rating at serial number 25 of the Table of SRO 655(I)2007 for the purpose of SED exemption.
