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Harmonization of sales tax to complete by June

ISLAMABAD: Harmonization of sales tax between federal and provincial tax authorities may be completed by end-June 2021, officials in the Federal Board of Revenue (FBR) said on Wednesday.

The FBR said that the authorities were in the process of harmonizing the service sales tax across provincial jurisdictions, with support from the World Bank, which will be completed by end-June 2021.

The officials said that the government had shown commitment to the International Monetary Fund (IMF) of taking several measures including broadening of sales tax base.

The government has committed to reforms the General Sales Tax (GST) system, underpinned by a unified tax base and within the confines of the current constitution.

The authorities will: (i) eliminate all zero-rated goods (Fifth Schedule), except on export and capital machinery goods and move them to the standard sales tax rate; (ii) remove reduced rates under the Eight Schedule and bring all those goods to the standard sales tax rate; (iii) eliminate exemptions (Sixth Schedule) excluding a small subset of goods (i.e., basic food, medicines, live animals for human consumption, education and health-related goods) and bring all others to the standard rate; and (iv) remove the Ninth Schedule to replace a specific tax rate for cell phones with the standard rate.

These reforms are expected to yield an estimated 0.7 percent of GDP on an annualized basis.

Moreover, the authorities are also in the process of harmonizing the service sales tax across provincial jurisdictions, with support from the World Bank, expected to be completed by end-June 2021.