ISLAMABAD: As all the essential commodities of common man’s use are either totally exempted from levy of sales tax or subjected reduced sales tax rates, therefore there is no proposal under consideration at any of forums of the Federal Board of Revenue (FBR) to reduce standard rate of sales tax from the current rate of 17%.
However, a well placed source at FBR told Customs Today that to avoid burdening the common man with indirect taxes on essential commodities rate of customs duty on import of food basket items vegetables, pulses etc. has already been kept at zero percent. So, no proposal for reduction in customs duty on essential commodities is under consideration of FBR.
The source referring to the current rate of sales tax and federal excise duty (FED) said that the tax policy mix increased the share of direct taxes from 19% in year 1970-71 to 39.92% in 2014-15. Direct taxes are progressive taxes and the figures are clearly indicating the policy of progressive taxation being followed.
Secondly, the sources said that the tax policy was aimed at reducing/eliminating exemptions from the system to broadening the base and bring the concept of equity in the tax system. In this regard, the entire concessionary regime has been considered by a high power committee constituted by the Minister for Finance, Revenue and Statistics.
The committee has recommended a three years span for elimination of all the concessionary SROs. During the budget exercise 2014-15, 2015-16 and 2016-17, large number of SROs granting concessions to various industries has been reviewed and rescinded.
The source said that reforms in Customs tariff were started in the early 1990s, however, in 1995, after Pakistan’s joining the WTO, the process accelerated. In 1995, there were eleven (11) tariff slabs with the highest rate of 65% and the lowest of 10%.
These tariff rates have been gradually reduced with the elimination of slabs and making the tariff simpler and trade friendly. The reforms and rationalization process is still continuing. As a result of the efforts of the Government, maximum tariff rate of 30% was brought down to 20%.
The source recalled that numbers of tariff slabs were also reduced from 5 to 4 in the budget of financial year 2016-17. Rate of customs duty on the import of primary raw material not manufactured locally as well on the import of machinery was reduced to 3%, in the budget 2016-17.
Prior to the commencement of tariff reforms various concessions and protection through SROs had been provided to various industrial sectors of the economy” the source said adding that in order to provide a level playing field the Government has withdrawn customs related concessions / exemptions amounting to Rs. 64.15 billion in the last three years. All of these reforms are geared to stimulate the domestic economy and make it more progressive.
