May 30, 2006	Tuesday	Jumadi-ul-Awwal 2, 1427

KARACHI, May 29: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged the government to reduce the 15 per cent general sales tax (GST) to 10 per cent in order to speed up industrial growth and economic uplift. It has also sought tax exemption on entire items of necessities.

The federation in its pre-budget 2006-07 proposals presented to the government on Monday said that low GST rate would help reduce prices of commodities immediately.

It said that that sales tax on utility bills should be exempted for small-scale industries.

For sales tax registration purposes, the limit for retailers should be increased to Rs10 million from Rs5 million.

Sales tax was still being charged on exercise books and note books, which writing material for education, whereas books, magazines, printed materials were exempted from the GST. This disparity, the chamber demanded should be removed immediately.

The FPCCI 59-page budget proposals document has highlighted the issues of income tax, sales tax, customs duty and central excise duty that were confronting the industries and businesses.

The federation also suggested that the government and the private sector would have to work hard for broadening the tax base, boosting the tax-to-GDP ratio, creating environment conducive to investment, simplification of tax and laws and removal of distortion and irritants from the tax laws and growth of small and medium units.

However, the federation noted that the business community was highly concerned over the rising cost of doing business in the country, growing poverty, low quality of public services, limited job avenues etc.

In case of income tax, the FPCCI proposed that the capital gains on sale of shares which were held for less than a year should be taxed at a nominal rate. However there should be no tax on capital gains on shares held by the investors for more than one year, it added.

It recommended that a task force should be formed to study and suggest the taxability of capital gains on immovable properties and stocks.

“There is a need to reduce the rate of income tax for the corporate and non-corporate sectors by 10 per cent. The rate of withholding tax on supplies should also be reduced to two per cent. The present statutory limit of exemption under the income tax law be increased to Rs200,000 from Rs100,000,” the FPCCI strongly proposed.

It further said that the withholding tax on import of raw materials under Section 148 should be reduced to four per cent.

“The Workers Welfare Fund and Workers Profit Participation Fund are no longer provided any benefit to the workers. On the contrary the contributions to these funds have taken the shape of unnecessary additional levy for the taxpayers, which need to be withdrawn. The law abiding citizens are paying greater cost than evaders,” the federation suggested.

On customs duties, the affiliated bodies of the FPCCI requested for tariff cuts mostly in the areas of raw material and capital goods. “It will enhance productivity of the industrial units through the reduction in cost of doing business besides making local products competitive both at local and international levels,” the apex body said.

On smuggling-prone items, the FPCCI said that the customs duty should be levied at the rate of five per cent to discourage smuggling of such items.

Seeking protection for local industries and to remain competitive on the world markets, the federation suggested that five per cent customs duty be charged on all raw materials not produced locally, 10 per cent on raw materials available locally and intermediate/semi-finished goods, 15 per cent on finished products not manufactured locally and 25 per cent on goods manufactured locally.

On excise duty, it proposed that the excise duty should be withdrawn on all locally manufactured items.