ISLAMABAD: The Federal Board of Revenue (FBR) is awaiting approval from the Finance Ministry before sending the draught presidential Ordinance to the Law Division for vetting in order to revoke Rs330 billion in sales tax exemptions.
The draught of the Tax Laws (4th Amendment) Ordinance, 2021, is complete at the FBR level, sources informed Business Recorder on Friday.
The Ministry of Finance has yet to give the FBR permission to begin the vetting process for the proposed ordinance. The FBR will share the ordinance with the Law Division for vetting as soon as the Finance Ministry issues instructions to the FBR.
After obtaining instructions from the Ministry of Finance, the FBR will forward the draught presidential ordinance to the Law Division for review.
Sales tax exemptions, zero-rating, and other reduced sales tax rates may be subjected to the ordinary sales tax rate of 17 percent.
As a result of withdrawal of sales tax exemptions of Rs330 billion, the FBR’s revenue collection target is expected to be increased by Rs330 billion for the current fiscal year (2021-22).
Presently, the FBR is chasing a revenue collection target of Rs5,829 billion for year 2021-22.
Through the Ordinance, the Sixth Schedule (Exemption Schedule) of the Sales Tax Act, 1990 would be completely revamped. Except essential food and health items, the government will withdraw sales tax exemptions from the Sixth Schedule. Sources said that the government may impose 17 percent sales tax on cellular mobile phones in CKD/CBU form under the Ninth Schedule of the Sales Tax Act, 1990.
The government will also withdraw all kinds of sales tax zero-rating except exports.
The ordinance would have six major components: (i) No zero-rating; (ii) 17 percent sales tax on mobile phones: (iii); withdrawal of major sales tax exemptions; (iv): continuation of exemptions or zero-ratings on essential food items and health items; (v) imposition of standard rate of sales tax on reduced rates items, and (vi) withdrawal of sales tax exemption subjected to conditions or conditional exemptions.