ISLAMABAD: Federal Board of Revenue (FBR) has withdrawn zero-rating facility on imported raw and ginned cotton.
The FBR in budgetary instructions issued to field offices of Inland Revenue and Pakistan Customs, said that import of raw and ginned cotton had been zero-rated through amendments made in SRO 1125(I)/2011 dated December 31, 2011 vide SRO 36(I)/2017 dated January 23, 2017.
“This facility of zero-rating on the import of cotton has been withdrawn with effect from July 15, 2017 through amendments made in SRO 1125(I)/2011 vide SRO 584(I)/2017, dated July 01, 2017 by specifically inserting the words ‘imported raw and ginned cotton’ in Table-I of the SRO 1125(I)/2011 which provides for exclusion not entitled for zero-rating.
Import of raw cotton and ginned cotton is chargeable to sales tax at five percent with effect from July 15, 2017 under Table I of the Eighth Schedule to the Sales Tax Act, 1990.
The FBR said that to ensure parity between of sales tax on commercial import of finished fabric and locally produced/supplied fabric, rate of sales tax on import of finished fabric has been fixed at six percent along with 2 percent value addition tax.
For the sake of clarification, PCT Headings of finished fabric for the purpose of charging sales tax at import stage have been provided for through amending SRO 868(I)/2017.
Rate of sales tax on supplies of finished fabric to and by retailers, to end consumers, other supplies of finished fabric, locally manufactured finished articles of textile and textile made-ups, carpets, leather and artificial leather has also been enhanced from five percent to six percent.
The FBR further explained that to remove ambiguity with respect to charging of further tax under Section 3(1A) on items covered under SRO 1125(I)/2011, rate of further tax has been specifically provided for through SRO 584(I)/2017 dated July 01, 2017 but at reduced rate of one percent.
However, finished items covered under SRO 1125(I)/2011 shall continue to be subjected to further tax at two percent.
