It is reliably learnt here on Monday that the SRO.575(I)/2008 allows exemption of customs duty and sales tax on the import of plant, machinery, equipment and apparatus, including capital goods falling under the 'HS Codes' specified in notification. This is a conditional exemption of duties and taxes available to specific sectors and projects as specified in the SRO.575 (I)/2008.
Two parallel concessionary regimes were working under the SRO.575 (I)/2008 and SRO 549(I)/2008. Both the notifications were simultaneously granting sales tax exemptions on the import of plant, machinery and equipment. The FBR has withdrawn sales tax exemption through one regime, but the second concessionary regime vide SRO.575 (I)/2008 is still intact. Resultantly, the sales tax exemption is still available on wide range of plant, machinery and equipment under SRO.575 (I)/2008.
Legally, importers as per conditions of the SRO.575 (I)/2008 are still entitled to avail exemption of sales tax on the import of plant, machinery and equipment. It has been apprehended that the importers might try to import machinery/equipment liable to 17 percent sales tax under the cover of sales tax exemption available on the import of machinery/equipment under the SRO.575(I)/2008.
For example, according to serial number 23 of the SRO.575(I)/2008, sales tax exemption would be available on the import of machinery and equipment imported by importer. Under the same customs notification, certain kind of machinery/equipment as per Chapters 84 and 85 of the Pakistan Customs Tariff (PCT) heading is also exempted from sales tax. Similarly the whole SRO.575(I)/2008 allows sales tax exemption on fulfilment of laid down conditions.
Recently, the facility of zero-rating on plant, machinery and equipment including parts thereof has been withdrawn by amending SRO 549(I)/2008, dated June 11, 2008 through notification SRO No 230(I)/2011, dated 15.03.2011. These goods will now be liable for sales tax at the rate of 17 percent. At the same time, SRO.575 (I)/2008 issued by the customs department has already allowed the sales tax exemption on the import of a wide range of items for different industries and sectors.
Experts were of the view that the sales tax zero-rating facility would still continue on the import of components and sub-components and its parts under the SRO 549(I)/2008, whereas facility of zero-rating on plant, machinery and equipment including parts thereof was withdrawn through amendment in the SRO 549(I)/2008.
The FBR will have to resolve this different treatment of sales tax through sales tax SRO.230(I)/2011 and customs SRO.575(I)/2008, which may result in ambiguity, sources added. Due to this confusion, an importer may try to avail exemption of sales tax on the import of plant, machinery and equipment under SRO.575 (I)/2008 despite the fact that the same machinery and equipment has now been subjected to standard rate of 17 percent sales tax under the SRO.230(I)/2011.