ISLAMABAD: Unchanged rate of sales tax on large scale manufacturer sector tantamount keeping the existing rate of inflation intact.
A well placed source at Federal Board of Revenue (FBR) told Customs Today that FBR collected Rs 1157931 million sales tax from the large scale manufacturer sector in last two financial years, Rs 545,883 million in fiscal year 2014-15 and Rs 612,048 million in the previous fiscal year.
The source said that FBR treated all the manufacturers registered in the Large Taxpayers Units as Large Scale Manufacturers; however since the rate of sales tax had remained constant during these fiscal years therefore the amount collected had no bearing on inflation.
The source explained that inflation was the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.
FBR categorizes manufacturing sector comprises of two sub-sectors; Large Scale Manufacturing and Small Scale Manufacturing” the source said adding that large scale manufacturing covered the establishments registered under Factories Act 1934 or qualifying for registration (having 10 or more employees) including repair and service industries. While the small scale manufacturing covered all such manufacturing establishments not covered in large scale manufacturing.
In this regard the source said that FBR relied on two sources of data on large scale manufacturing- Census of Manufacturing Industries (CMI) and monthly data on manufacturing sectors output for the imposition of sales tax.
Census data is used to derive benchmark estimates after every five years. The latest CMI for 2005-06 was conducted by Former FBS, in collaboration with Provincial Directorates of Industries and Bureaus of Statistics.
The source added that CMI measures production and structural changes of large-scale manufacturing industries (LSMI).
It provides data on values of inputs and outputs, census value added, contribution to GDP, fixed assets, stocks, employment and employment cost and industrial taxes. It takes into account new industrial developments and captures new industrial products and establishments. It is used to develop new weights for Quantum Index of Manufacturing.
