ISLAMABAD: The Federal Board of Revenue (FBR) is likely to withdraw sales tax, income tax and customs duty exemptions granted through statutory regulatory orders (SROs) in budget (2014-15) including major amendments to SRO 1125(I)/2011 dealing with lower rates of sales tax (2 to 5 percent) on five leading export-oriented sectors – textile, leather, carpets, surgical and sports goods.
According to reports, Rs500 billion worth tax exemptions are likely to be phased out over the next three years. Some of the exemptions will be withdrawn in budget (2014-15) while the rest to go in phases.
As per details, SRO 1125 is the only major export related SRO specifically dealing with export oriented sectors and applies multiple rates of sales tax on exports. Under the notification, 2 percent sales tax, 3 percent, 5 percent and 17 percent sales tax is applicable at different stages. The FBR is proposing amendments to SRO 1125(I)/2011 to rationalise tax structure in the upcoming budget.
The import of textile machinery is currently covered under the regime of zero-rated custom duty and sales tax through SRO 809. However by the end of June, this facility is going to expire and the government may impose 17 percent sales tax on the import of machinery.
The government had issued Technology Up-gradation Support order 2010 to provide incentives to textile machinery and technology to attract investment in textile sector; this is also going to expire on June 30, 2014. Further textile policy (2009-14) formulated by the previous government is also going to expire on June 30, 2014 and all the schemes under this policy would stand expired. Sales tax at the rate of 2 percent is applicable on yarn, 3 percent on fabric and 5 percent on garments which is expected to be revised in budget (2014-15).
In budget (2014-15), the FBR is reviewing customs SROs including SRO.567, SRO.565, SRO.575, SRO.678, SRO.655, SRO.656, SRO.809 and SRO.693. Sales tax SROs including SRO.727, SRO.1125, SRO.549, SRO.575, SRO.551, SRO.69, SRO.501 and SRO.670 and all SROs relating to income tax.
The major sales tax concessionary SROs in 2012-13 were SRO.727(I)/2011 (plant and machinery); SRO.549(I)/2008 (zero percent sales tax on specific goods); SRO.811(I)2009 (zero-percent sales tax on polyethylene and polypropylene); SRO.575(I)/2006 (machinery, equipment, apparatus and items including capital goods); SRO.492(I)/2009 (temporary imports); SRO.551(I)/2008 (exemption from sales tax on imports of certain goods); SRO.863(I)/2007 (zero-rating of specific goods) and SRO.69(I)/2006 (levy of sales tax on rapeseed). Under the ongoing exercise, the FBR is examining SRO.567(1)/2006; rationalisation of customs duty on Pathalic Anhydride (PA) industry; SRO. 575(1)/2006; SRO 809(1)/2009; SRO 678(1)/2004; SRO.565(1)/2004; retaining entries under SRO 565(1)/2006; explanation to be added under SRO 565(1)/2006 and other proposals related to SRO 565(1)/2006.
The FBR is examining amendment in SRO 565(1)/2006 (S.No 2) – change in description of components; amendment in SRO 565(1)/2006 (S.No 3) – change in description of manufactured goods; amendment in SRO 565(1)/2006 (S.No 4) – to exclude “Fin-Type Evaporator” for the manufacture of refrigerators/visicoolers; amendment in SRO 565(1)/2006 (S.No 5) – to add “retarder / speed reducer without motor” for the manufacturing of semi-automatic washing machines; amendment in SRO 565(1)/2006 (S.No 6) – to incorporate detailed description of input materials used in the manufacturing of car air conditioners; amendment in SRO 565(I)/2006 (S.No 9) – change in description of manufactured goods; amendment in SRO 565(1)/2006 (S.No 20) – addition of raw material; amendment in SRO 565(1)/2006 (S. No 64) – PVC manufacturing industry interpretation and application of SRO; amendment in SRO 565(1)/2006 (S. No 74) – to add and correct certain entries; amendment in SRO 565(1)/2006 (S.No 88) – to delete CRC steel coils from welded steel pipes / tubes; amendment in SRO 565(1)/2006 – add special condition for the manufacturers of CRC steel coils from HRC steel coils (S.No 91); amendment in SRO 565(1)/2006 (S. No 106) – to delete locally manufactured raw materials.
The FBR is examining amendment in SRO 655(1)/2006 – export of automotive components & assemblies; amendment in SRO 656(1)/2006 – revision of minimum in-house facilities; amendment in SRO 656(1)/2006 – reduction in duty on tyres for vehicles of heading 87.01 under HS code 4011.2090 to 5%; amendment in SRO 499(1)/2009 – imports v/s local assembly of HEVS; amendment in SRO 693(1)/2006 & customs tariff to add the parts in respect of the new vehicles; amendment in SRO 693(1)/2006 & customs tariff – levy of additional duty on the import of localised parts/components of cars, motorcycles & tractors; amendment in SRO 693(1)/2006 and customs tariff – protection to locally manufactured road wheels and amendment in SRO 693(1)/2006.