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ISLAMABAD: Owing to stiff pressure from the business community, the Federal Board of Revenue has withdrawn 5 per cent sales tax on commercial importers and restored the old regime of zero-rating for five major export-oriented sectors.
An abortive attempt was made by the FBR to bring these five exportable sectors' local supply of textile, leather, sports, surgical and carpet goods under the sales tax net, besides raising revenue from commercial importers through a notification issued on Nov 4.However, the decision was reversed after two-and-a-half weeks and a notification was issued here on Wednesday. It would come into effect retrospectively from Nov 4 to comply with the demands of the business community.
Through this notification, the FBR has also abolished single rate of sales tax on supply of these five sectors in the domestic market.
The single rate was introduced to remove distortions in the levy of sales tax among taxpayers on the direction of the International Monetary Fund.
The notification prescribed detailed conditions for availing zero rate of sales tax on supply and imports.
For the textile sector, the facility of zero-rating shall be available to every such person engaged in manufacturing or trading in textile sector, including carpets and jute, who is registered for sales tax other than retailer.
No tax shall be payable at any stage of the supply chain if goods are sold by a registered person to a registered person till the stage of processing where sales tax shall be charged as specified hereunder; and the benefit of this notification shall be available to registered importers, traders, manufactures and exporters.
In case a commercial importer sells any imported goods to unregistered persons, he shall charge and pay sales tax at the rate of 6 per cent of value of supply.
If goods are usable in textile sector, up to the stage of spinning, including the product of spinning, such as yarn and its by-products, such an importer shall charge and pay sales tax at the rate of 4 per cent of value of supply.
No sales tax shall be payable at ginning or man-made and synthetic fiber manufacturing stage. In case of registered manufacturers importing their input or acquiring inputs from commercial importers or registered manufacturers, such manufacturers shall charge and pay sales tax at 6 per cent of value of supply only at the spinning stage, ie yarn and its byproducts.
If these goods are supplied to any unregistered person provided that if such goods relate to the stages after spinning, sales tax shall be charged and paid at 4 per cent of the value of supply. In case of yarn purchases on payment of sales tax at 6 per cent of value of supply from spinning mills by unregistered persons ie traders or persons engaged in activities, like sizing, wrapping, weaving, intermediary and other ancillary processes etc. before processing of finished fabric, no further amount of sales tax shall be charged or demanded.
In case of registered persons engaged in providing processing services of any kind in respect of textile goods, such a person shall charge from the person who owns the goods but is not a registered person, sales tax at 4 per cent of service charges; in case of stages after weaving.
At the stage of processing or finishing of any kind of fabric or stitching of such fabric, if any registered person supplies goods, including finished products like finished, dyed/processed/printed fabric, textile apparel, home textile and clothing including garments and all non-woven products etc. to an unregistered buyer, he shall charge and pay sales tax at 4 per cent of the value of supply.
