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Dairy sector enjoys concessions: Bajwa insists FBR empowered to issue SROs

Dairy sector enjoys concessions: Bajwa insists FBR empowered to issue SROs

ISLAMABAD: Federal Board of Revenue (FBR) Chairman Tariq Bajwa said that the government did not violate any law while issuing statutory regulatory orders (SROs), saying that the federal government had the legal authority to revise tax rates under Income Tax Ordinance 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005.

Talking to the media at Parliament House here, Tariq Bajwa said that the FBR had adopted the legal course laid down for the issuance of SROs.

The government has the right to increase or decrease tax rates through SROs under the relevant fiscal laws and new tax has been imposed through SROs. The SRO 420(I)/2014, 421(I)/2014 and 422(I)/2014, all dated June 6, 2014, have been issued with the approval of the government. The revision in the tax rates can be done through the issuance of the SROs by the federal government, he added.

The FBR chairman pointed out that the Parliament could impose new tax only, however, the Parliament has authorised the federal government through legislation to revise tax rates, the FBR chairman explained. The relevant provisions of the Sales Tax Act, 1990 and Federal Excise Act, 2005 clearly authorizes the FBR to issue and withdraw notifications, abolish concessionary rate of sales tax and rationalise taxes, he emphasized.

Tariq Bajwa said that the cost of doing business had been increased for the non-compliant taxpayers through Finance Bill (2014-15). He claimed that the board was tightening the noose around the non-filers and un-registered persons and the cost of doing business had been increasing through doubling of withholding tax rates. The doubling of the WHT for non-compliant taxpayers will force the un-registered persons to come into the tax net, he expressed his hope.

To a question about capital gains tax (CGT) on stock exchanges, FBR Senior Member Tax Policy Shahid Hussain Asad said that the scope of the CGT on securities had been expanded in the budget (2014-15).

Earlier briefing the members of Senate Standing Committee on Finance, Tariq Bajwa said that property taxation was a provincial subject and the federal government could not impose taxes on property as Article 160 of the Constitution specify list of taxes to be imposed by the centre.

To a query of Senator Saleem Mandviwalla on SROs, the FBR chief said that not a single tax exemption had been granted last year against 56 exemptions granted through issuance of SROs in 2012-13. The cost of tax exemptions stood at around Rs478 billion in 2013-14 and it is for the first time that real figures are being issued in view of a comprehensive study conducted on the exemptions,” he informed.

Senator Osman Saifullah Khan raised a question whether the earlier figures pertaining to the cost of exemptions in the economic survey were not correct, the FBR chief said that he could not comment on it because he had never been part of the FBR in the past. He revealed that under the phase out plan for withdrawal of tax exemptions, the FBR could not withdraw all exemptions because of international treaties, sovereign guarantees and socially sensitive items.

Meanwhile, Tariq Bajwa said that the board attempted to change the status of dairy sector from zero-rating to sales tax exemption to check their refunds but the budgetary proposal was not approved during the last Finance Bill (2013-14). He informed the Senate Standing Committee on Finance that the government had given maximum tax concessions to the dairy sector particularly sales tax zero-rating. The dairy industry is paying no taxes but claiming sales tax refunds despite zero-rating. Last year, the FBR made an attempt to change the status of the dairy sector from zero-rating to exemption, but the proposal was not cleared in the Finance Bill (2013-14). The FBR had changed the status of sales tax zero-rating to exemption in 2013-14, but it was reverted to zero-rating in Finance Act 2013. The dairy sector is paying no taxes and the government is paying back refunds out of its own pocket.

Any sector enjoying sales tax zero-rating facility is a sector enjoying maximum concessions like dairy industry, he remarked. On the imports made by dairy sector, the FBR chairman said that the FBR was charging minimum rate of 5 percent customs duty on the import of machinery by the dairy sector besides other lucrative tax concessions. When Senator Sughra Imam proposed change of status of dairy sector from zero-rating to exemption, the FBR chief welcomed the proposal, saying that the Senate Standing Committee on Finance could forward the recommendation for incorporation in the Finance Bill 2014-15.