Finance Supplementary Bill: FBR issues salient features of sales tax and federal excise duty

ISLAMABAD: Federal Board of Revenue (FBR) on Thursday issued salient features of changes brought into sales tax and Federal Excise Duty (FED) regime through Finance Supplementary (Second Amendment) Bill, 2019, presented on January 23, 2019.

 

 

 

The changes to sales tax and FED regime are as follow:

— Exemption on plant and machinery to Greenfield industries
In order to encourage greenfield investment and industrialization, it is being proposed to grant exemption from payment of sales tax on imported plant and machinery, falling in chapter 84 and 85 of PCT excluding consumer durables and office equipment, to be used for setting up new industry for production of taxable goods. The exemption shall be subject to an exemption certificate to be issued by concerned Commissioner Inland Revenue. The Board will also circulate an indicative positive list of such machinery.

— Payment of sales tax refunds through promissory notes

Huge amounts claimed by taxpayers are stuck up in refunds. This causes liquidity crunch for businesses. These refunds have accumulated over a long time. Section 67A is proposed to be inserted in the Sales Tax Act, 1990, to provide for issuance of promissory notes to claimants at their option. The proposed Tenth Schedule provides for features and mechanism for issuance of these notes.

— Simplification and rationalization of Tax Structure on Import of Mobile Phones

The existing feature-based sales tax slabs on mobile phones in the Ninth Schedule to the Sales Tax Act, 1990, are complicated and also do not differentiate between inexpensive and expensive mobile phones. The current slabs are being replaced with import value based slabs.

— Increase in FED on imported luxury cars / SUVs; and Levy of FED on local luxury cars / SUVs

Federal Excise Duty is already imposed on imported cars and jeeps of engine capacity exceeding 1800cc at 20 percent. In order to further discourage the import of such luxury cars and jeeps, it is proposed to enhance the rate of Excise Duty from 20 percent to 25 percent, for such cars and jeeps up to capacity 3000 cc and to 30 percent for cars exceeding 3000 cc. Furthermore, it is proposed to levy Excise Duty at 10 percent on locally manufactured / assembled cars and SUVs etcwith engine capacity exceeding 1800cc

— Continuation of exemption on plant, machinery and equipment for Renewable Energy

Exemption on machinery and equipment relating to renewable energy is already available under the Sixth Schedule to the Sales Tax Act, 1990. However, in order to provide for certainty and give confidence to investor, the continuity of exemption is being assured up to 30th June, 2023, by amending relevant provisions in the Sixth Schedule.

— Relief for cancer patients

The existing exemption in the Sixth Schedule of the Sales Tax Act, 1990, relating to ostomy procedures for cancer patients is restrictive and lacks clarity. The exemption is now being linked to ostomy related appliances and items listed under PCT heading 99.25. The said heading is being recast through amendment to the Customs Act, 1969, and comprehensive list of items is being included therein.

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