The Federal Board of Revenue (FBR) has clarified and defined the scope of zero rated tax under the Sales Tax Act, 1990, through Section 4 of the Act.
This move is part of the FBR’s ongoing efforts to provide clarity and transparency in tax legislation. The updated version of the Sales Tax Act, 1990, incorporates amendments introduced through the Finance Act, 2021, effective until June 30, 2021.
Section 4 of the Sales Tax Act, 1990, explicitly outlines the goods subject to zero rated tax, overriding the general provisions outlined in Section 3, except for those in sub-section (1A). The specific goods charged at a zero percent tax rate are as follows:
(a) Goods Exported or Goods Specified in the Fifth Schedule: Goods intended for export and those specified in the Fifth Schedule of the Sales Tax Act, 1990, fall under the category of zero rated tax. This provision is crucial for promoting exports and ensuring that goods intended for international markets are subject to favorable tax treatment.
(b) Supply of Stores and Provisions for Consumption Aboard a Conveyance: Goods supplied as stores and provisions for consumption aboard a conveyance heading to a destination outside Pakistan, as specified in Section 24 of the Customs Act, 1969 (IV of 1969), are charged at a zero percent tax rate. This provision acknowledges the unique circumstances surrounding goods consumed during international travel.
(c) Other Goods as Specified by the Federal Government: The Federal Government holds the authority to specify additional goods subject to zero rated tax through notifications published in the official Gazette. This provision is designed to allow flexibility for the government to respond to immediate needs related to national security, natural disasters, national food security in emergency situations, and the implementation of bilateral and multilateral agreements.
The inclusion of this provision empowers the government to take swift action in exceptional circumstances, ensuring that the tax framework remains adaptable to unforeseen events and emergencies.
The definition and delineation of zero rated tax goods under Section 4 of the Sales Tax Act, 1990, are crucial for businesses and taxpayers to understand the tax implications associated with different categories of goods. By explicitly outlining the goods subject to zero rated tax, the FBR aims to foster transparency, streamline tax administration, and provide a clear framework for businesses to navigate their tax obligations.
As Pakistan continues to refine and update its tax legislation, the FBR’s efforts to define and communicate the scope of zero rated tax goods contribute to a more efficient and equitable tax system. This move aligns with broader objectives aimed at creating a conducive environment for businesses, supporting economic growth, and ensuring compliance with international standards in tax administration.
