Inland Revenue directed to ensure no zero-rate supply of gas, electricity

ISLAMABAD: Federal Board of Revenue (FBR) has directed offices of Inland Revenue to ensure implementation of normal tax rate on supply of gas and electricity to manufacturing facilities.

In a communication with the offices of Inland Revenue, the FBR said: “Field formations are requested to ensure implementation accordingly and to ensure that no zero-rated supplies are made by utility companies within their jurisdiction.”

The FBR said that SRO 1125(I)/2011 dated 31.12.2011, relating to zero-rating of five export-oriented sectors, has been rescinded since 1st July, 2019 vide rescinding SRO 694(I)/2019 dated 29.06.2019.

From 1st July, 2019, the items listed in the said SRO shall be charged to sales tax at 17 percent at import and local supply.

Only in case of integrated retail outlets, sales tax on finished textile and leather item shall be charged at 14 percent.

All Sales Tax General Orders (STGOs) granting zero-rating on supply of electricity, gas, diesel, furnace oil and coal have been rescinded vide STGO 100/2019 dated 29.06.2019.

In order to resolve the issue of increased sales tax refunds of exporters due to withdrawal of zero-rating on inputs, the scope of Expeditious Refund System is proposed to be extended with automated payment on generated RPOs.

The changes to rules in this respect shall soon be notified, the FBR said.

The Sales Tax Special Procedure Rules, 2007, issued vide SRO 480(I)/2007 dated 09.06.2007 have also been rescinded through SRO 694(I)/2019, dated 29.06.2019.

All special procedures provided therein have been thus discontinued. The desirable provisions from these rules have either been transposed to the Sales Tax Act, 1990, or are being transposed to the Sales Tax Rules, 2006.

Necessary amendments to the Sales Tax Rules, 2006, shall follow in few days, the FBR said.

The Sales Tax Special Procedure (Withholding) Rules, 2007, issued vide SRO 660(I)/2007 have also been rescinded. The withholding requirements and rates, and the exclusions therefrom have been transposed to the new Eleventh schedule. Other procedural provisions have been re-enacted in Chapter XIV-D of the Sales Tax Rules, 2006, through SRO 698(I)/2019 dated 29.06.2019.

SRO 693(1)72019 dated 29.06.2019 amends SRO 509(1)72013 pertaining to 5 percent extra tax on supplies of gas and electricity. The Government, semi-government and statutory regulatory bodies have been excluded from levy of said 5 percent extra tax.

SRO 692(I)/2019 dated 29.06.2019 amends SRO 648(I)/2013 which prescribes exclusions from chargeability of further tax. Two new serial numbers 12 and 13 have been added which provide exclusion from further tax to supplies to the Government, semi government and statutory regulatory bodies and supplies of white crystalline sugar.

The further tax under Section 3(1 A) of the Sales Tax Act, 1990, shall not be charged in the aforesaid two cases.

SRO 190(I)/2002, issued in exercise of powers under clause (iii) of the first proviso to section 4 of the Sales Tax Act, 1990, provides that zero-rating shall not apply to exports of goods specified in SRO as made by air or via land route to Afghanistan and through Afghanistan to Central Asian Republics (CARs).

The 2002-notification has now been amended vide SRO 691(I)/2019 dated 29.06.2019 to exclude PVC and PMC materials from purview of SRO 190(I)/2002, meaning thereby that zero-rating on export of these items shall be available on exports to Afghanistan or to CARs through Afghanistan.

This notification has been rescinded vide SRO 694(I)/2019 dated 29.06.2019. However, this rescission is erroneous as the notification no. SRO 769(I)/2009 had already been superseded vide SRO 811(I)/2009 dated 19.09.2009, which after some amendments was finally rescinded vide SRO 611(I)/2015 dated 30.06.2015.

Therefore, rescission of SRO 769(I)/2009 has no practical effect and this may be ignored.

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