FBR outlines sales tax amendments through second supplementary finance act

ISLAMABAD: Federal Board of Revenue (FBR) has summarized amendments to sales tax regime through Finance Supplementary (Second Amendment) Act, 2019 and directed the officials of Inland Revenue to take necessary action for implementation.

The FBR said that to liquidate huge amount claimed by taxpayers in refunds which have been accumulated over a long time, the government has decided to pay the same through sales tax refund bonds, which shall have a maturity period of three years.

Simple profit at 10 percent per annum is also proposed to be paid. The claimants shall also be able to raise the much needed cash by selling these notes in the security market.

A new Section 67A has been inserted in the Sales Tax Act, 1990 to include enabling provisions for payment of refunds in this manner and also to provide for regulatory mechanism relating to issuance, transfer, redemption and other related matters.

The FBR said that in the Sixth Schedule, the exemption of sales tax already available in relation to plant, machinery and equipment required for power generation from renewable sources of energy has been guaranteed up to June 30, 2023, to provide for certainty and confidence to investors. Same protection has been ensured on the import side of the similar equipment as covered under the Sixth Schedule.

The FBR said that keeping in view the difficulties being faced by cancer patients and also on the orders of the Supreme Court, items related to ostomy procedures for treatment of cancer patients, which were not expressly and exhaustively mentioned in Sixth Schedule to Sales Tax Act, 1990, have now been so covered by substituting Serial Number 117 and relating it to heading 99.25 in the First Schedule to the Customs Act.

The FBR said that presently sales tax exemption on plant and machinery is available only to specified sectors. Others sectors have to pay sales tax on import of plant and machinery.

This sales tax is adjustable against future output tax but such adjustment takes place after a long time when the industry starts selling its product. This serves as an impediment to investment by increasing initial costs.

In order to encourage green field investment and industrialization, exemption from payment of sales tax on imported plant and machinery to be used for setting up new industry for production of taxable goods has been provided by amending Sixth Schedule to the Sales Tax Act, 1990, as imported by the persons registered on or after 1st July, 2019 through Sr No 150 in Table 1 of Sixth Schedule to the Sales Tax Act, 1990.

The FBR said that the new rates on the import of cellular mobile phones have been introduced by substitution in the Ninth Schedule to the Sales Tax Act, 1990.

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