Official sources said here on Monday that the CBR has issued Pakistan Customs Tariff (PCT) headings of such machinery/equipment to all collectors of customs to identify items on which sales tax would be charged at the rate of zero percent at the import stage as well as local supply.
Currently, SRO 500 does not specify the PCT headings of each item under zero percent sales tax. Now, it would be crystal clear whether the sales tax concession would be applicable on a particular item or not as per CBR instructions.
Officials said that the list of items, classified under Pakistan Customs Tariff (2004-2005), liable to zero rate of sales tax has been issued to check the misuse of SRO 500.
If a person imports television or refrigerator in the name of machinery covered under concessionary SRO 500, the customs at the ports would easily identify the items chargeable to zero percent sales tax and verify it with the concerned PCT heading to ensure that concession be given to only those items covered under the notification.
The sales tax authorities have dispatched items classified under Chapter 84, Chapter 85 and Chapter 90 of the Pakistan Customs Tariff 2004-2005 to Collectors of customs.
The CBR has drafted two different lists of items. The first list would deal with the items on which sales tax at the rate of zero percent would be applicable at the import stage.
The second list deals with the items liable to zero percent sales tax on local supply of locally manufactured machinery or imported plant/machinery.
The CBR has intimated to Collectors of customs that a number of queries had been received in the Board regarding exemption on imported and supply of imported and locally manufactured plants, machinery and equipment as specified at the S. No. 1 and S. No. 2 of the Table in SRO 500(I)/2004.
These queries generally relate to the issue as to what constitute plant, machinery and equipment (imported or locally manufactured) and the conditionalities for being eligible to zero rate of sales tax on their import or supply.
The issue has been examined in the Board. It is clarified that under 'Explanation' contained in the SRO.500(I)/2004, zero-rate of sales tax would be available on such plant, machinery and equipment which is covered under various notifications issued under section 19 of the Custom Act 1969 as well as those items of machinery, which are currently subject to statutory rate of 5 percent duty.
Clarifying serial number 2 of the SRO.500(I)/2004, the CBR opined that the facility of zero-rate of sales tax would available to such plant, machinery and equipment, which is imported (serial number 1) or locally manufactured. For this purpose, the CBR has notified the list of such items liable to zero rate of sales tax on the supply of plant, machinery and equipment, either imported or locally manufactured.