Sources told Business Recorder here on Friday that the FBR was examining the issue to fulfill conditions of World Trade Organization (WTO) regime. Due to extreme pressure of domestic industry, the FBR seems to be unable to remove the said discrimination between local and imported products under the WTO regime.
The proposal was 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. The revised SRO No. 1125 was required to be chalked out in line with the provisions of the WTO regime.
On the other hand, the FBR has indicated that there is a lot of pressure from domestic industry and hence it is not possible to remove this sales tax. Sources said that though having initially agreed to resolve the issue of SRO No. 1125, the FBR could not get approval from the Ministry of Finance. It was decided that a meeting in this regard will be held between secretary commerce and chairman FBR on the revision of the SRO No. 1125, violation of national treatment and discriminatory imposition of sales tax on imported products.
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 has to ensure that National Treatment Clause of WTO is not being violated. While securing the national interests, the FBR was required to 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