ISLAMABAD: The Federal Board of Revenue (FBR) is expected to remove a major sales tax anomaly through the Finance Bill 2014 by allowing sales tax adjustment at the rate of 17 percent on certain consumer goods subjected to “extra sales tax” supplied to registered buyers.
As per details, the board has sought removal of a major tax anomaly in the FY 2014-15 budget, by proposing appropriate amendments to the sales tax law to remove the anomaly through the Finance Bill 2014.
The board intends to remove anomaly that has cropped up against non-adjustment of 17 percent sale tax on input items attracting “extra sales tax” by introducing amendments to sales tax special procedure. It is to be noted that the FBR introduced “extra sales tax” at the rate of 2 percent vide notification 896(I)/2013 dated October 4, 2013 on 11 items.
These items were earlier brought into the Third Schedule of the Sales Tax Act, 1990 and thus subject to payment of sales tax on a retail price basis. Later, these items were deleted from the Third Schedule of the Sales Tax Act, 1990 due to strong reservations of relevant trade and industry. However, the buyers were not entitled to claim input tax adjustment at 17% and it resulted in an anomaly in the sales tax law. Apparently, all those eleven goods apparently are consumer items, some of these are used by industrial sector. The non-adjustment of sales tax (input tax) created an anomaly.
Since input adjustment is a legitimate right and basic principle of value addition sales tax, the FBR in the FY 2014-15 budget intends to remove this anomaly through an appropriate amendment to the sales tax law. The FBR may allow input tax adjustment at 17 percent on supplies to other than end-consumer, particularly to persons registered as industrial consumers to address the matter.
