The Federal Board of Revenue (FBR) will collect 5 percent sales tax, along with one percent sales tax on value-addition, on the import of finished goods under SRO 1125(I)/2011. Arshad Shehzad, a leading sales tax expert of Karachi, on Monday issued highlights of SRO 1125(I)/2011 dated December 31, 2011. The highlights explain the key decisions of the new sales tax zero-rating regime from January 1, 2012.

Following are the highlights of SRO 1125(I)/2011:

1. Single rate of 5 percent, instead of earlier two different rates--4 percent and 6 percent.

2. Import by commercial importer @ 2 percent along with 1 percent value-addition /tax.

3. Adjustment of input allowed with output.

4. Simplification in procedure.

5. Sales for reduced rate import to other than five sectors were allowed @ 5 percent. Earlier, it applied standard rate ie 16 percent.

6. Import of industrial input by manufacturer of five sectors would remain zero-rated.

7. Import of finished goods would attract 5 percent sales tax along with 1percent value addition tax.

8. Retailer would attract 5 percent sales tax on purchase of these goods with the facility of adjustment & not liable to pay turnover tax under special procedure. However, they have to pay turnover tax on sales of items other than listed in notification, Arshad said.

Copyright Business Recorder, 2012