Sources told Business Recorder on Wednesday that the FRB officials and budget makers had discussed this proposal in a meeting. The proposed increase in sales tax on electricity and POL products would have no negative implications on the registered commercial and industrial units, they added. As the registered entities can claim input tax adjustment, the sales tax increase would only hurt the un-registered industrial and commercial consumers.
Sources said that the government intends to discourage people, who are carrying out businesses, but not registered with the sales tax department. The proposal is primarily aimed at discouraging the un-registered potential businessmen in the country.
The normal registered persons would not face any problem in case the sales tax on electricity and POL is being increased in coming budget. Contrary to this, un-registered persons would face problems due to non-availability of adjustment facility under sales tax mechanism of input tax/output tax. Similarly, the registered persons would not be required to increase prices of their commodities, as sales tax is an adjustable levy. The sales tax paid on utilities could be adjusted under the Value Added Tax (VAT) regime. But, the un-registered units might pass on the sales tax increase to the consumers.
About the rate of increased sales tax, sources said that it has yet not been decided whether the rate would be 18 percent; 20 percent; 23 percent or 25 percent. But there would be some slight increase in sales tax on electricity and petroleum products being consumed by industrial and commercial units.