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Shaky ST collection prompts FBR to probe into tea sector

Shaky ST collection prompts FBR to probe into tea sector

ISLAMABAD: The poor growth in the collection of Sale Tax on tea in 2013-14, prompted the Federal Board of Revenue to undertake a probe to ferret out facts. The step has been taken in view of the withdrawal of concessionary rate of 5 percent sales tax on the commodity and imposition of standard rate of 17 percent sales tax on tea.

The FBR notified lower rate of 5 percent sales tax on import and supply of black tea through SRO 608(I)/2012 on June 1, 2012. The sales tax was reduced on tea from 16 to 5 percent as a measure to check its smuggling.

However, in March 2013, the FBR notified imposition of standard rate of sales tax on the import of tea and withdrawal of concessionary rate of 5 percent. The board was of the view that tea manufacturers failed to pass on the benefit of major reduction in sales tax to consumers during the last six months of 2012-13 while smuggling also continued unabated, adding that the step also failed to increase tea import through legal channels during the corresponding period.

The FBR was expecting 300 percent increase in sales tax payment due to increase in sales tax from 5 percent to 17 percent. Three times increase in rate of sales tax should have resulted in 300 percent increase in sales tax contribution by the tea sector. However, the tea sector has not contributed 300 percent increase as far as sales tax payments are concerned during first half (July-December) of 2013-14. Contrary to this, the FBR had witnessed increase of 20-25 percent in sales tax from tea manufacturers. The situation prompted FBR is ascertaining the reasons behind such sales tax payments before taking some enforcement action against the said sector, sources added.