According to the latest quarterly review issued by the Federal Board of Revenue (FBR) here on Wednesday, the Withholding Tax (WHT) contributes a major chunk ie around 68% to the collection of direct taxes. The nine major components of withholding taxes that contributed around 85% to total WHT collection are: contracts, imports, salaries, telephone, exports, bank interest/securities, cash withdrawals, dividends and electricity. As far as growth is concerned, collection from dividends grew by 43%, followed by contracts (24.5%), cash withdrawals (23%), imports (22%) and salaries (16.1%).
The highest contributor in withholding tax is contracts (26.5%) followed by imports (21.6%) and salaries (11.1%). Further break-up reveals that the share of only two items ie contract and imports is around 48% and the addition of salary item raises the share of these three items to nearly 60% in total withholding taxes, showing high reliance on few items.
It said that the sales tax collection during 2015-16 has been around Rs 1,324 billion against Rs 1,088 billion in the corresponding period of last year. The overall sales tax collection grew by 21.7% and around Rs 236 billion additional amount has been collected during 2015-16 as compared to the collection of previous year. The collection of sales tax domestic grew by 19.7%, whereas, sales tax imports increased by 23.6%.
As a whole, the revenue target has been met to the extent of 107.6%, around 7 billion higher than the assigned target of Rs 1,230.3 billion for FY 2015-16. Within sales tax, the share of sales tax imports is around 52% and that of sales tax domestic is around 48% during 2015-16. During last two years, the composition has slightly changed as the share of STM has gone up from 50.8% to 51.6% and share of sales tax domestic (STD) has gone down from 49.2% to 48.4%.
Monthly growth behaviour of sales tax collection indicates a negative growth in first two months during 2015-16, however, from September onwards collection started picking up and a healthy growth was recorded in the remaining months of the year. The collection of sales tax domestic is concentrated in few commodities. This is confirmed by the fact that four commodities ie petroleum products, electrical energy, cement, fertilisers, aerated water and cigarettes contribute around 60% to the total sales tax domestic. The share of major 10 commodities is 70% in the total net sales tax domestic.
Out of ten major items, except fertilisers all other major items have registered a positive double digits growth during 2015-16. In terms of growth, services were on the top with 96% growth, followed by electrical energy (52.9%), aerated water (48.9%), sugar (42.4%) and natural gas (26.4%). The collection of other items like cement, food products and cigarettes grew by 21.6%, 22.6% and 13.3% respectively.
The POL is the top most contributor with 42.1% share in sales tax domestic collection followed by electrical energy (5.8%) and cement (4.4%) during FY 2015-16. It is pertinent to mention that during 2015-16, the share of POL products has declined from 45.3% in 2014-15 to 42.1%. On the other hand, the share of electrical energy has increased from 4.6% in 214-15 to 5.8% in 2015-16. The share of cement remained constant at 4.4% during last two years, it added.
The share of sales tax (imports) in total sales tax net collection is around 52%. The net collection of sales tax imports during FY: 2015-16 stood at Rs 683.5 billion against Rs 553 billion in fiscal year: 2014-15 entailing a growth of 23.6% despite negligible growth in the overall imports of the country. Apart from imports, customs duties is also a base for determination of sales tax on imports. Thus, robust growths in the collection of customs has contributed significantly to the growth in the sales tax collection during FY 2015-16.
Major 10 commodities of sales tax import have contributed a major chunk ie 72% in sales tax (imports) collection (Table 13). The detailed data indicates that 60% of sales tax imports is contributed by POL products (Ch:27), iron & steel (Ch:72), machinery(Ch:84 & 85) and vehicles(Ch:87).
Like sales tax domestic, petroleum is a leading source of sales tax collection at import stage as well. Its share in sales tax imports is around 32%. The collection from POL products was Rs 219 billion during July-June, 2015-16 against Rs 166 billion in the corresponding period of previous year. The collection increased by 32% despite 28% decline in the imports of POL products. Since customs duty is also a base of sales tax, higher revenue in POL Products in customs substantially improved the collection of sales tax import related to petroleum product. Moreover, the imports of petroleum gases (PCT 2711) increased excessively by 245% resulting in 255% growth in sales tax.
The collection from iron and steel grew significantly by 28.6% partly attributable to 13.2% growth in its import. Moreover, excessive growth in customs duty during 2015-16 has also contributed in increased collection of sales tax imports. The collection from machinery, vehicles, plastics, organic chemicals & tea and coffee exhibited growth in the collection of sales tax driven by growths in their respective value of imports. On the other hand, the collection from fertilisers dropped by 6.3% mainly due to decline in 6.1% in the value of imports of fertilisers. On the other hand, oilseed recorded negative growth in sales tax imports by 14% while imports grew by 6.9%, the FBR added.