ISLAMABAD: The government is likely to impose a 5 percent sales tax on a wide range of goods in the budget for fiscal year 2014-15 scheduled to be announced on Tuesday (June 3).
As per details, the five percent sales tax is likely to be imposed on a wide range of goods including import and supply of plant/machinery (not manufactured locally); cool chain machinery and equipment and machinery equipment for development of grain handling/storage facilities. Similarly, 17 percent sales tax is likely to be imposed on machinery/equipment and other capital goods for service sectors and capital goods imported for establishing wholesale/retail chain stores and other items.
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Reports suggest that the standard rate of 17 percent sales tax would remain the same in 2014-15, however, the government would impose a special 5 percent sales tax on many items in budget 2014-15. A number of items specified in SROs to be rescinded would be subjected to 5 percent lower rate of sales tax. The sales tax exemption on all socially sensitive goods and sectors would be retained by transferring such items from SROs to the Sixth Schedule (Exemption) to the Sales Tax Act, 1990. Other zero-rated items under SROs would be transferred to the Fifth Schedule (Zero-rating) of the Sales Tax Act.
On the other hand, the government would convert federal excise duty (FED) of Rs400 per metric ton on cement to 5 percent ad valorem on retail price basis.
Some of the items to be subjected to 5 percent minimum sales tax are plant and machinery not manufactured locally subject to certain conditions. The low rate of 5 percent sales tax would be charged on items imported by call centres, business processing outsourcing facilities duly approved by Telecommunication Authority; machinery, equipment, materials, capital goods, specialised vehicles (4×4 non luxury) i.e single or double cabin pickups, accessories, spares, chemicals and consumables meant for mineral exploration phase; complete plants for relocated industries; machinery, equipment and other capital goods meant for initial installation, balancing, modernisation, replacement or expansion of oil refining petrochemical and petrochemical downstream products including fibres and heavy chemical industry, cryogenic facility for ethylene storage and handling and proprietary Formwork System for building/structures of a height of 100 ft and above and its various items/ components.
Meanwhile, the government is likely to reduce General Sales Tax (GST) on tractors from 16 to 10 per cent in the budget.
In the run-up to the budget, the local tractor manufacturers and Pakistan Association of Auto Parts and Accessories Manufacturers (PAAPAM) have approached different ministers and officials to plead that 16 percent GST was leading to massive reduction in production as farmers were not buying new tractors due to higher prices and lack of funding from the Zarai Tarqiati Bank Limited (ZTBL). Both the manufacturers and PAAPAM had requested the government to slash the GST from existing 16pc to 10pc.
The National Assembly’s Standing Committee on Industries and Production also recommended reduction in the GST on tractors to 10pc from the current 16pc. In this context, the Finance Minister and FBR have agreed to slash GST to 10pc which will be announced in the Finance Bill 2014-15.
