ISLAMABAD: Federal Board of Revenue (FBR) on Tuesday said that standard rate of sales tax has been enhanced to 18 per cent to increase the tax to GDP ratio.
The FBR through Circular No. 01 of 2023 dated February 28, 2023 explained the major changes brought through Finance Supplementary Act, 2023.
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“In order to reduce fiscal gap and increase tax to GDP ratio, the standard rate of sales tax has been increased from 17 per cent to 18 per cent,” according to the FBR.
In order to remove ambiguity regard power to enhance sales tax, the FBR further stated: “In line with the provision of section 3(2)(b) of Sales Tax Act, 1990, the Federal Government has been empowered to enhance the rate of sales tax in respect of goods falling in purview of the Third Schedule, through insertion of a new proviso in clause (a) of sub-section (2) of section 3 of the Act.”
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According to the circular, in the Eighth Schedule, S. No. 47 and 56 of Table-1 has been aligned with the increase in the standard rate of sales tax.
Similarly, imported cellular/mobile phones (CBU) valuing US$ 200 and above were chargeable to 17 per cent under Table-2 of the Ninth Schedule. The Schedule ibid has now been rationalized in line with the enhancement in standard rate of sales tax and the considered decision to introduce special rate of 25 per cent for certain luxury goods.
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The new rates of sales tax for imported mobile phones are as follows:
Mobile phone valuing $201 to $500 the sales tax rate at 18 per cent shall apply
Mobile phone valuing $501 and above, the sales tax rate at 25 per cent shall apply
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It is pertinent to point out that there is no change in sales tax regime o locally manufactured mobile phones and imported mobile phones valuing less than US$ 200 which shall be continued to be chargeable as per the relevant provision of Table-2 of the Ninth Schedule.
