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

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

Finance Supplementary Bill: Federal Board of Revenue (FBR) has issued salient features of sales tax and federal excise duty proposed through Finance Supplementary (Second Amendment) Bill, 2019.

The bill, presented on January 23, 2019, introduces several changes aimed at stimulating investment, simplifying tax structures, and providing relief in various sectors.

One significant change is the exemption granted to Greenfield industries on imported plant and machinery. The exemption, applicable to machinery falling under chapter 84 and 85 of PCT (excluding consumer durables and office equipment), is designed to encourage new industrial setups for the production of taxable goods. However, it is subject to the issuance of an exemption certificate by the concerned Commissioner Inland Revenue, with an indicative positive list of eligible machinery to be circulated by the Board.

Recognizing the liquidity crunch faced by businesses due to pending sales tax refunds, the FBR proposes a new mechanism. Section 67A is suggested to be inserted in the Sales Tax Act, 1990, allowing the issuance of promissory notes to claimants at their option. The Tenth Schedule outlines the features and mechanism for the issuance of these notes.

The tax structure on the import of mobile phones is set to be simplified and rationalized. The existing complex and indiscriminate feature-based sales tax slabs in the Ninth Schedule will be replaced with import value-based slabs, addressing the differentiation between inexpensive and expensive mobile phones.

In an effort to discourage the import of luxury cars and SUVs, an increase in Federal Excise Duty is proposed. The rate for imported cars and jeeps with an engine capacity up to 3000 cc will rise from 20 percent to 25 percent, and for those exceeding 3000 cc, it will increase to 30 percent. Additionally, a 10 percent FED will be levied on locally manufactured/assembled cars and SUVs with an engine capacity exceeding 1800cc.

The continuity of exemption on plant, machinery, and equipment for Renewable Energy is assured until June 30, 2023. This move aims to provide certainty and instill confidence in investors, supporting the renewable energy sector.

A notable provision addresses the restrictive and unclear existing exemption in the Sixth Schedule related to ostomy procedures for cancer patients. The exemption is now linked to ostomy-related appliances and items listed under PCT heading 99.25. This involves a recasting of the heading through an amendment to the Customs Act, 1969, with a comprehensive list of items to be included.

These proposed changes reflect the government’s commitment to fostering industrial growth, simplifying tax procedures, and providing targeted relief to specific sectors. The Finance Supplementary (Second Amendment) Bill, 2019, is anticipated to undergo further deliberations before potential implementation, as stakeholders assess the potential impact on various industries and the economy at large.