KARACHI: The tax practitioners have discussed impact of abolishing SRO 1125(I)/2011 under which sales tax zero rating was available for export sector.
These were discussed at post budget seminar organized by Karachi Tax Bar Association (KTBA) in collaboration with Pakistan Tax Bar Association (PTBA) on Thursday.
Adnan Mufti at Shekha & Mufti Chartered Accountants explained changes in indirect taxes in his presentation.
He said zero rated and reduced rates tax regime for 5 export oriented sectors i.e. textile, leather, carpets, sports and surgical goods was introduced from 1st January 2012 vide SRO 1125. Thereafter 19 amendments were made from time to time in SRO 1125.
He highlighted following impacts would emerge after abolishment of SRO 1125:
a) Goods which were notified under SRO 1125 now would restored at standard rate of sales tax i.e. 17%.
b) Supplies of finished articles of textile, textile made ups, leather and artificial leather made by retailers would be subject to sales tax @ 15% subject to integration with FBR online system where data is transmitted to the FBR’s computerized system in real time. Mode and manner to be prescribed by FBR.
c) Zero rating on import of plant & machinery (not manufactured locally) by textile industry would be abolished and will be subject to sales tax @ 10%;
d) Ginned cotton, one of the major raw material of textile sector, will become subject to sales tax @ 10% under Eight Schedule. It was previously zero rated under SRO 1125 for textile sectors and exempted under Sixth Schedule for others;
e) Zero rating facility on “raw cotton” stands transposed with tax exemption under Sixth Schedule;
f) Zero rating facility on furnace oil, diesel oil, coal, electricity and gas will be withdrawn.
He explained in details about the overall changes brought in the indirect measures through Finance Bill 2019.
The changes in tax structure will have inflationary impact on sugar, milk, soft drinks, garments, shoes, cooking oil, cement, etc. costlier than before. Customs Duty on more than 1,650 raw materials and industrial inputs reduced – paper industry to enjoy more benefits.
He said that restoration of trust was much needed for a tax revenue target of Rs5555 billion.
Practical measures for boosting exports, employment, protection of local industry missing. Imports of luxury items like chocolate, eatable, shaving razors, heavy cars, etc. should have been banned. Revenue hit for the initial short run should be absorbed for a long term sustainability.
Machinery parts and accessories used in the textile sector will be free from CD; it’s a mismatch since zero rating for textiles has been abolished in sales tax.
FED imposed on cars; mismatch vis.a.vis sugar, milk, cooking oil, etc.
CD waived on 18 medicinal inputs as well as on medicines for certain rare diseases. We should expect cheaper medicines in the next fiscal year.
