In a bid to bolster trade and facilitate economic activities, the Federal Board of Revenue (FBR) has expanded its powers to authorize the delivery of certain goods without the requirement of immediate tax payment.
This notable development is encapsulated in Section 60 of the Sales Tax Act, 1990, which has been updated up to June 30, 2021, incorporating amendments through the Finance Act, 2021.
The Sales Tax Act, 1990, serves as the legislative backbone for regulating taxation on the sale and supply of goods in Pakistan. The recent modifications to Section 60 grant the Federal Government the authority to permit the import of specified goods, or classes of goods, without the obligation of immediate tax payment. This move aims to support specific categories of importers and manufacturers, fostering a more conducive environment for international trade and local industry.
The text of Section 60 reads, “Subject to such conditions, limitations or restrictions as it thinks fit to impose, the Federal Government may authorize the import of goods or class of goods, without payment of the whole or any part of the tax payable thereon to the following persons, namely:
(i) registered importers importing such goods temporarily with a view to subsequent exportation;
(ii) registered manufacturer-cum-exporters who import raw materials and intermediary products for further manufacture of goods meant for export.”
This provision provides a framework for the Federal Government to exercise discretionary powers in authorizing the tax-free import of goods by specific categories of importers and manufacturers. The first category includes registered importers engaged in the temporary importation of goods with the intention of subsequent exportation. The second category caters to registered manufacturer-cum-exporters who import raw materials and intermediary products for the purpose of further manufacturing goods destined for export.
The move is expected to stimulate international trade by easing the financial burden on registered importers engaged in temporary importation and facilitating registered manufacturer-cum-exporters in their production processes. By allowing for the deferred payment of taxes on imported goods, the government aims to enhance the competitiveness of these businesses in the global market.
While the provision outlines the broad parameters for tax-free importation, the specific conditions, limitations, and restrictions that the Federal Government may impose are yet to be disclosed. Clarity on these details will be crucial for businesses to navigate the importation process and comply with the necessary requirements set by the government.
The expansion of powers under Section 60 aligns with the government’s strategy to promote a business-friendly environment, attract foreign investment, and bolster local industries engaged in export-oriented manufacturing. The discretionary authority granted to the Federal Government reflects a commitment to adapt to evolving economic conditions and address the unique challenges faced by specific segments of the business community.
As businesses and importers engage with this development, clear communication from the government regarding the conditions for tax-free importation will be essential for a smooth and effective implementation. The measure is expected to contribute to the resilience and growth of the import and manufacturing sectors, fostering economic development and reinforcing Pakistan’s position in the global market.
