ISLAMABAD: The government is planning abolition of capacity tax and introduction of revised Federal Excise Duty (FED) and sales tax rates on beverages from next fiscal year. According to reports, the budget-makers are finalising new taxation structure for beverage sector to be announced in budget (2014-15).
The Ministry of Finance has received a new FBR tax proposal on beverage sector to take away the capacity tax. Under the new tax structure, the FBR has proposed introduction of non-adjustable FED on concentrate and sugar, and exempt FED on aerated waters and retain 17 percent standard rate of sales tax on aerated waters. The capacity tax was imposed in 2013 on aerated waters on the commitment of major manufacturers to enhance the revenue by 25 percent. However, the capacity tax scheme did not achieve the desired results and resulted into litigation.
The FBR will also introduce the ‘electronic volume tracing’ in budget (2014-15) to collect sales tax/excise duty on the basis of actual production of beverages. One of the budget proposals for 2014-15 is the new concept of ‘electronic volume tracing’ likely to be implemented through Finance Bill (2014-15). The ‘electronic volume tracing’ would be outsourced to a third party to ascertain actual production of goods. The real objective of the whole exercise is that the beverage industry should pay the due taxes on the basis of volumes and production, sources added.
In budget (2013-14), the rate of federal excise duty on aerated waters was enhanced from 6 percent to 9 percent through amendment to S. No 4, 5 and 6 of Table I of the First Schedule to the Federal Excise Act, 2005. The enhanced rate came into effect on July 1, 2013. Hoverer, later the manufacturers of beverages and aerated water were allowed to pay capacity tax in lieu of the sales tax and Federal Excise Duty (FED) on the basis of production capacity of plants and machinery of units.
