The government is planning to revise sales tax zero-rating regime for five major export sectors, ie, textile, leather, surgical, carpets and sports goods under SRO No. 1125 to abolish any indiscrimination between local and imported products under World Trade Organization (WTO) regime. Sources told Business Recorder Tuesday that the Federal Board of Revenue (FBR) is expected to start working on the amendments to SRO No. 1125 to avoid indiscrimination between local and imported products under the WTO regime. The revised SRO No. 1125 would be chalked out in line with the provisions of the WTO regime.

According to sources, SRO No. 1125 governs five sectors which are of export importance to Pakistan. In these sectors the imported products are being taxes at the rate of 17 percent while the local products @ 5 percent. The FBR is looking the possibility of enhancing the tax on local products.

The FBR has to ensure that National Treatment Clause of WTO is not being violated. While securing the national interest, the FBR would revise SRO No. 1125 by first week of September 2017 to abolish any indiscrimination between local and imported products. The FBR will also share proposal for revision of SRO No. 1125 with the concerned ministry/departments.

The FBR had issued sales tax notifications to implement budgetary measures for 2017-18 including one percent further sales tax on supplies made to unregistered persons within the five export-oriented sectors under SRO 1125(1)/2011. The FBR has also issued SRO No. 584(1)/2017 subsequent to Finance Bill 2017-2018 to amend SRO special regime meant for five export oriented sectors under SRO No. 1125(1)/2011.

The reduced rate of 5 per cent sales tax was increased to 6 per cent under SRO No. 1125(1)/2011. Further tax at the rate of one per cent is introduced on supplies under SRO No. 1125 except on finished good which will attract further tax at the rate of 2 percent. Reduced rate facility was withdrawn from imported finished fabrics.

Copyright Business Recorder, 2017