Islamabad, June 12, 2024 – The Federal Board of Revenue (FBR) has unveiled a series of new sales tax measures through the Finance Bill 2024.
These measures aim to enhance revenue generation, streamline tax administration, and address various economic sectors’ needs. Here are the key changes introduced for the fiscal year 2024-25:
1. Withdrawal of Various Exemptions/Zero Rating and Reduced/Fixed Rates: The FBR has proposed the elimination of multiple exemptions, zero ratings, and reduced/fixed sales tax rates to standardize the tax system and increase revenue.
2. Mobile Phones Taxation: Mobile phones will now be taxed at the standard sales tax rate, except for those valued over USD 500, which will continue to be charged at the existing rate of 25%. This measure aims to streamline the tax structure for mobile phones and ensure higher-end products contribute more significantly to tax revenue.
3. Enhanced Sales Tax Rate for POS Retailers: The sales tax rate for point-of-sale (POS) retailers dealing in leather and textile products will increase from 15% to 18%. This adjustment is expected to boost revenue from these high-demand sectors.
4. Withholding Regime Expansion: A new withholding regime will be introduced for items such as lead, coal, scrap of paper and plastic, and silica. This measure aims to improve tax compliance and collection in these sectors.
5. Exemption for Iron and Steel Scrap: The levy of sales tax on iron and steel scrap will be exempted. This exemption is intended to support the recycling industry and reduce the cost burden on related businesses.
6. Phased Withdrawal of Sales Tax Exemption for ex-FATA/PATA: The sales tax exemption previously granted to the ex-FATA and PATA regions will be gradually withdrawn. This phased approach aims to integrate these regions into the national tax framework smoothly.
7. FBR Empowered to Fix Minimum Prices: The FBR will be empowered to set minimum prices for goods listed under the Third Schedule. This measure seeks to prevent under-invoicing and ensure fair tax collection.
8. Strengthening Provisions Related to Tax Fraud: Provisions related to tax fraud will be streamlined and strengthened to enhance enforcement and reduce evasion.
9. Changes in Assessment and Audit Provisions: Legal provisions concerning the assessment and audit processes will be revised to improve efficiency and fairness in tax administration.
10. Zero-Rating to Exemption for Petroleum Products: The zero-rating of sales tax on petroleum products will be converted to an exemption. This change aims to simplify the tax treatment of these critical goods.
11. Alignment of Default Surcharge Rate: The rate of default surcharge will be aligned with the State Bank of Pakistan’s policy rate of KIBOR plus 3%. This measure ensures that the surcharge is consistent with prevailing financial conditions.
The new sales tax measures introduced through the Finance Bill 2024 reflect the government’s commitment to enhancing tax revenue, simplifying the tax structure, and promoting fairer tax practices. These changes are expected to impact various sectors, improve compliance, and support the broader economic goals of Pakistan.
