ISLAMABAD: The Engineering Development Board (EDB) has proposed restoration of sales tax zero rating on the import of plant, machinery/equipment and parts thereof to promote investment, industrialisation and acquisition of modern technology.
The EBD suggested the move in its budget proposals to the FBR to substitute sales tax exemption with zero-rating on plant, machinery and equipment.
According to the budget proposal, the import and supply of plant, machinery and equipment (including boilers), was zero-rated for sales tax under SRO 549(1)/2008. By virtue of being zero-rated, local manufacturers of plant, machinery and equipment could claim credit of input sales tax paid by them on purchase of raw materials for the manufacturing thereof. However, it was withdrawn vide SRO 230(1)/2011.
Currently, under SRO 575(1)12006 plant, machinery and equipment (including boilers) are exempt from sales tax. By virtue of being exempt from the levy, local manufacturers of plant, machinery cannot claim credit of input sales tax paid by them on purchase of raw materials for the manufacturing thereof.
The imposition of sale tax at this stage has put the industry at disadvantage. Moreover, the imposition of sale tax at import stage blocks huge amounts, causing liquidity crunch for the industry and has put the local manufacturers of plant, machinery and equipment at a disadvantageous position vis-à-vis imports.
The EDB proposed zero-rating of sa1es tax on the import of plant, machinery and equipment and parts thereof may be restored to promote investment, industrialisation and acquisition of modern technology. Accordingly, the local industry may also be made zero-rated on the import of their inputs. If zero rating cannot be restored, a level playing field may be provided to local manufacturers by withdrawing the sales tax exemption on import & supply of plant, machinery & equipment etc.
