Karachi Chamber of Commerce and Industry (KCCI) has proposed restoration of sales tax exemption on supply of solar panels and inverters.
The KCCI in its proposals for budget 2022/2023 submitted to the Federal Board of Revenue (FBR), stated that solar panels and inverters were earlier granted zero rated of sales tax.
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The exemption from sales tax on supply of solar panels and inverters were withdrawn through supplementary finance bill 2021 thus imposing 17 per cent sales tax.
The chamber said that imposition of 17 per cent sales tax increased the cost for consumer and discourage use of alternative sources of energy.
Every household, commercial establishments and industries are opting for alternate sources of energy to reduce their expenditure and cost of doing business. Solar energy is now widely being used in Pakistan and helping to reduce dependence on costly thermal power.
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Every Household and commercial sector has been affected by exorbitant cost of electricity.
With imposition of 17 per cent sales tax, cost of solar panels and inverters will increase and discourage substitution.
It is proposed that exemption of sales tax on solar panel and inverters through Supplementary Finance Bill 2021 should be restored.
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Giving rationale, the chamber said that the proposal would reduce prices for consumers for saving the electricity and gas for local industries and oil imports. It is Import substantial for the country. Expansion of an industry which has good potential for growth.
The Karachi Chamber highlighted the issued on indenting agents stating that such agents have to pay 5 per cent withholding tax on inward remittances of commission while the indenting agents based in Sindh also have to pay Sindh Sales Tax on Services at 13 per cent.
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To avoid such rates of taxation, indenters now mostly retain the commission outside Pakistan and book import orders on Proforma Invoices or Contracts from suppliers. This results in loss of foreign exchange to the country.
In the online meeting with KCCI on June03, 2021, the Minister for Finance and Revenue agreed to the proposal that indenting commission should be treated as export proceeds and taken out of the purview of provincial service taxes. Indenting agents serve all of Pakistan and should therefore remain in Export regime just as IT and other service providers. The proposal may therefore be incorporated in budget.
Encourage remittance of foreign exchange and documentation.
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The chamber in another issue stated that large amounts of refund of Drawback of Local Taxes and Levies (DLTL) pertaining to exporters are delayed and remain unpaid for months.
Exporters face liquidity crunch due to blocked funds and blocked refunds have a negative impact on exports.
In the meeting with KCCI delegation in Islamabad on September 20, Minister for Finance and Revenue had assured the KCCI delegation that DLTL will continue and pending refunds will be expedited.
KCCI therefore submits that payments of DLTL should be released and backlog be cleared.
Improve liquidity for exporters and help to enhance exports.