KARACHI: The sales tax zero rate facility is available for imported labelled cloths even it is finished fabric under Pakistan Customs Tariff, Federal Board of Revenue (FBR) said that.
Inland Revenue Wing of the FBR stated that SRO 868(I)/ 2018 issued on August 31, 2017 has specified PCT headings of finished fabric and this does not include PCT headings of items like label cloth i.e. 5907.0000 which even if qualifying as finished fabric under PCT do not attract sales tax at 6 percent along with two percent value addition tax and are entitled for zero percent sales tax along with zero percent value addition tax.
Pakistan Customs has asked the FBR to clarify the chargeability of sales tax on imported labelled cloth falling under the PCT heading 5907.0000 under the provision of SRO 1125(I)/2011 dated December 31, 2011 amended from time to time.
The customs were of the opinion that benefit of zero rating of sales tax along with zero percent value addition tax is not available to commercial import of label cloth under S. No. 1(ii) of Table II of SRO 1125(I)/2011 date December 31, 2011 as amended vide SRO 584(I)/2017, dated July 01, 2017.
The IR Wing said that it may be noted that commercial imports of fabric were specifically subjected to sales tax at 6 percent plus 2 percent value addition tax under S. No. 1(viii) of Table II of SRO 1125(I)/2011 as inserted vide SRO 584(I)/2017 and the insertion was aimed at subjecting those type of fabric which were meant for use by general body of consumers.
However, certain items of industrial use not meant for sale to general body of consumers also came to be classified as fabric in view of classification under PCT. Therefore, S. No. 1(viiii) of Table II of SRO 1125(I)/2011 was substituted vide SRO 868(I)/2017 to provide for PCT headings of finished fabric which were likely to be used by general body by consumers and thus attracting sales tax at six percent along with two percent value addition tax.
