ISLAMABAD, June 18: As many as 42,000 taxpayers will be de-registered from the sales tax net as a result of the measures proposed in the budget for promoting growth in the small and medium enterprises (SMEs).

Official sources told Dawn on Friday that a task force would be established in each collectorate which would be responsible for processing the applications for de-registration.

They collectorates would be bound to accomplish the task within a period of one month and would have to submit a compliance report to the Central Board of Revenue (CBR) immediately. Elaborating further, the officials said that these 42,000 taxpayers were paying only around Rs200 million annually to the sales tax department.

The total number of retailers among 42,000 stood at 25,000 and manufacturers at 17,000. These taxpayers had a turnover in the range of Rs0.5 million to Rs5 million, and who were now exempted from the sales tax.

Consequently, retailers and manufactures having annual turnover amounting to less than Rs5 million will not be subjected to sales tax. This category of SMEs would no longer be subjected to requirements of sales tax law and would be able to grow without encumbrance of sales tax.

However, small retailers and manufacturers having turnover of less than Rs5 million would be subject to a flat rate of income tax, the officials said. The government had raised the exemption threshold of general sales tax (GST) for manufacturers to Rs5 million from the current Rs2.5 million.

While in the case of retailers, it was reduced from Rs20 million to Rs5 million in the 2004-05 budget. The officials said that abolishing of turnover tax of 2 per cent and raising of exemption threshold for both retailers and manufacturers would help in boosting the SME sector.

They further said that exemptions from sales tax would help the SMEs to manufacture on a small scale the products which could also be used in the exportable products.

According to other incentives for the SME sector, the officials said the SME Bank would increase its lending to Rs3 billion in 2004-05 and broaden the scope of industries under the Hunarmand scheme. The Hunarmand scheme was launched last year for a small group of industries.