ISLAMABAD, Feb 27: The collection of sales tax remained short of the target by Rs10 billion during the first half year (July-December) of the fiscal year 2006-07. The collections stood at Rs146.237 billion as against the projected target of Rs156.237 billion set for the same period.
The CBR’s second quarterly report (October-December) released here on Tuesday said to achieve the GST target, the shortfall will have to be compensated by sales tax collected at domestic sales. Given the fact that the collection from domestic market is also adversely affected by unexpected build-up of refunds to the power sector, additional tax efforts would be required to make up for this loss.
Of the shortfall sales tax collections, the sales tax on domestic sales has missed the target by Rs1.3 billion and the rest of the shortfall is on account of sales tax on imports.
The shortfall in sales tax on domestic sales, which is also attributable to the slowdown in imports and decline in collection of customs duty, has been responsible for less than targeted collection from sales tax on imports.
The report warned that it was estimated that if the current trend continued during the next 6 months, the gap between the target and collection of customs duty will also widen to about Rs20 billion, which needs to be plugged.
According to the report, the collection of income tax on demand and unearthing of concealed income has, however, reduced significantly in the post-reform period. It was around 15-16 per cent of the gross income tax collection in the pre-reform period.
However, the collection on the account has reduced to 6.9 per cent in fiscal year 2005-06. The declining trend has continued during the half year of the current fiscal as it has reached 2.5 per cent.
The collection of withholding tax has increased by 26 per cent during the first half year (July-Dec) of the current fiscal year as the collection from this source reached Rs76.2 billion against Rs60.5 billion collected during the corresponding period of last year.
Of the total withholding tax collection, the report said, only eight items have contributed Rs64.5 billion, which constitutes 84.7 per cent of total WT receipts. Out of these eight major sources, two heads, namely, contracts and imports have contributed Rs37.8 billion, which is more than half of the WT receipts.
A detailed analysis of WT confirms a robust growth in collection from leading sources with the exception of WT on import where the growth has been negative (0.4 per cent), mainly due to deceleration in import growth.
Barring this source, the increase in other WT heads is consistent with enhanced sectoral economic activities. The significant growth of 108.3 per cent on account of cash withdrawal is aligned with tax measures introduced in federal budget 2006-07 wherein the WT rate on cash withdrawal from banks was increased by 100 per cent (from 0.1 per cent to 0.2 per cent).
Around 81 per cent increase in collection from the telecommunication sector indicates that the momentum of growth has been maintained. This has developed as a major service sector having far-reaching implications for all segments of society. Likewise 43.8 per cent growth in WT on bank interest is due to steady increase in interest rates.