KARACHI: Federal Board of Revenue (FBR) has been urged to allow distributors of lubricating oils to charge sales tax on their supplies.
Presently, industrial consumers are reluctant to buy goods directly from distributors as they are unable to issue sales tax invoice, thus resulting in a significant setback to the business carried out by the distributors, according to budget proposals 2017/2018 received by the FBR.
SRO 896(I)/2013 amended Chapter XIII of the Sales Tax Special Procedure Rules 2007 and included lubricant oils therein which have been subjected to extra sales tax of 2 percent.
Resultantly, the responsibility to collect and deposit sales tax of 19 percent, inclusive of two percent extra tax, has been placed on the manufacturer and importer of specified goods falling in above Special Procedures.
However, the subsequent supply of specified goods by the wholesalers, distributors, etc. on which extra sales tax has been paid, are exempted payment of sales tax.
Since the subsequent supply chain (distributors etc.) are exempt from charging sales tax and they cannot issue sales tax invoice to the buyers, the industrial consumers cannot claim whole sales tax of 19% in case of purchases of lubricants from these suppliers.
Hence, the business carried via the distributor channel has suffered a significant setback as industrial consumers are reluctant to buy goods directly from the distributors as they would have to bear incidence of sales tax as cost element of lubricants and it has increased the cost of their doing business.
