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  • Feb 21st, 2013
  • Comments Off on Supplies against international tenders: standard rate of 16 percent ST may be imposed
The government is planning to impose standard rate of 16 percent sales tax on the supplies against international tenders at import stage as well as on local supplies prior to budget (2013-14). Sources told Business Recorder here on Wednesday that the Federal Board of Revenue has substituted zero-rating with exemption on supplies against international tender enforced through Finance Act, 2012 vide deletion of Supplies against International Tender from Fifth Schedule and addition in Sixth Schedule of the Sales Tax Act, 1990, effective from the June 2, 2012.

These amendments were made in last budget (2012-13) to exempt supplies against international tenders. The FBR has proposed Ministry of Finance to withdraw the exemption granted to the supplies against international tenders. Following withdrawal of exemption, such supplies would be subject to 16 percent sales tax. The zero-rating on supplies against international tender was replaced with the exemption in an attempt to check inadmissible sales tax refund claims. Local supplies against international tenders have approached the FBR that they are unable to claim input tax adjustment due to exemption on such supplies. The persons engaged in local supplies of goods have argued that the domestic supplies as well as imported supplies be subjected to a uniform rate of 16 percent sales tax to end discrepancy, sources maintained.

Ministry of Finance has received a procedural proposal of the FBR to equally treat the local and imported supplies against international tenders by imposition of the 16 percent sales tax on both the stages, they added. Sources said that the FBR had replaced zero rating facility on supplies against international tender with exemption to eliminate undue refund in budget (2012-13). Sales tax rules 2006 having detailed procedure was introduced where zero rating is replaced with exemption to eliminate abuse of refund facility on this particular account. The exemption against supply is restricted to the extent of foreign grant, aid or loan component of the tender only. The foreign component of the international tender requires to be received in foreign currency and needs to be surrendered to the SBP as per regulations.

Invitation for the tender requires proper advertisement in newspaper, international journals or websites, the successful bidder, in order to avail the exemption facility, requires prior approval of the board along with submission of following documents application having full particulars including NTN/STRN (wherever required); certificate for compliance of PPRA rules; certificate for deposit of foreign exchange with SBP; value of tender amount of foreign currency and equivalence in Pak rupee; list of goods tentatively in prescribed format, which can be revised and any other document required by the Board.

The board subject to satisfaction of the documentation issues provisional approval to exempt supplies against tender under intimation to the respective RTO or LTUs. The supplier may operate under exemption regime till finalisation of contract. Thereafter the board may issue final approval upon submission of the final list of goods in the same prescribed format under intimation to respective RTOs and LTUs. In case of goods found not to be supplied against international tender in a manner provided in the rules the sales tax leviable would be recovered accordingly along with default surcharge and penalties, tax expert added.

Copyright Business Recorder, 2013


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