ISLAMABAD, May 4: The government is likely to abolish excise duty in the next year’s budget with a view to effectively enforcing the sales tax regime. Official sources told Dawn that with the enforcement of the sales tax regime, excise duty was expected to be abolished to avoid double taxation. The sources said the Board of Investment (BoI) had submitted budgetary proposals to the ministry of finance to encourage local and foreign investment.

The board said that in line with the government directive of keeping customs duties, income tax and sales tax as the main sources of revenue, excise duty needed to be abolished. It said excise duty should have progressively been abolished with the levy of sales tax in 1990.

The sources said the BoI also supported a proposal that the rate of general sales tax (GST) should be brought down to 10 per cent from the current 15 per cent. The board believed that sales tax on sampling and promotional activities should be levied at the value at which it was provided to a customer, which is the essence of value-added tax. If a product is given free to a consumer, no sales tax should be charged.

The BoI said in pharmaceutical sector there was 25 per cent customs duty on locally-produced drugs while there was no customs duty on imported raw material for producing drugs. The BoI proposed that this system needed to be rationalized and that a five per cent customs duty should be levied as proposed for other sectors.

About the customs duty, the board believed that a minimum 10 per cent of tariff differential should be maintained between import duties on raw materials and their finished products irrespective of classification, primary or intermediate raw materials.

The government has been advised that a reasonable tariff differential /protection should be provided to local manufacturers as envisaged in the 1997 Investment Policy.