Explaining the proposed amendment and its implication, he said that under sub clause 3 of clause of the Finance Bill, seeking amendment it has been proposed to exclude the scope of zero rating from application of further sales tax in terms of section 3(1)A of the S.T.A. 1990.
He informed zero-rating of sales tax on five export sector was re-introduced last year through notification 491(i)/2016 and supplies of major raw material of five export oriented sector enlisted under table-1 of the notification were declared zero rated. Last year the question was raised, whether the further sales tax is chargeable on zero rated supplies of these sectors or not?, The FBR at that point of time was on the view that further sales tax is chargeable on zero rated supplies; however the legal experts had opinion otherwise. The issue for interpretation was led to the court where the honourable Lahore High Court has passed the judgement accepting interpretation of the legal experts and hold further sales tax is not applicable on zero rated supplies.
He said it seems that in order to claim the right for application of further sales tax on zero rated supplies this amendment was proposed. However in his opinion still the proposed amendment is legally drafted and the application of further sales tax on zero rated supplies still can be challenged. The proposed amendment has significant revenue impact and legal implication and besides five export oriented sectors may impact all sorts of zero rated supplies including exports if the separate exclusion under SRO 648(i)2013 may not be extended, Arshad Shehzad added.
Copyright Business Recorder, 2017