A tax expert explained that SRO 777(I)/2018 has amended SRO 1125(I)/2011 (ie, special regime for five export-oriented sectors).
Under the notification, input tax on packing material is allowed wef 1st July 2018. The condition "X" of the notification is accordingly stands omitted. The sales tax rate on supplies of finished fabric to retailers and end consumers is increased from 6% to 9%. Sales tax rate on import of finished fabric is increased from 6% to 9%. Rate of Value addition tax @ 2% remains same. The sales tax rate on supplies of locally manufactured articles including textile and textile made-ups is increased from 6% to 9%. The facility of reduced rate of sales tax on supplies of imported goods @ 9% is extended to artificial leather sector as well. Sales tax rate on import and supplies of imported finished goods of textile and leather sectors are increased from 6% to 9%. Rate of Value addition tax @ 2% remains same. Moreover, the facility of reduced rate on supplies of imported finished goods was extended to different bags, trollies including school bags. List of items are appearing in the relevant notification.
The tax expert said that the 'Further Sales Tax' @ 1% is made applicable on supplies of finished fabric to unregistered persons. Earlier there was an ambiguity and difference of opinion over application of further sales tax on finished fabric.
The persons supplying finished fabric to end-retailers/ end-consumers and suppliers of locally manufactured finished article can still avail facility to charge reduced rate @ 6% instead of 9% if they integrate their system with FBR's system and transmit their supplies /sales on real time bases from such date as notified by the FBR through separate notification, the tax expert added.
Under SRO 781(1)/2018, the FBR will charge 5 percent sales tax on IT services and IT enabled services within the jurisdiction of Islamabad capital territory.
The further sales tax would not be applicable on supplies of foam or spring mattresses and other foam products for household use under SRO 780(1)/2018.
Under the revised SRO 1125, the benefit of reduced rate of nine per cent on import of finished goods of leather and artificial leather, ready to use by the general public shall be available to the finished goods including trunks, suitcases, briefcases, school satchels, traveling bags, handbags, shopping bags, wallets, purses, sports bags; suitcases of composition leather; school bags, trolley bags, laptop bags, etc, of composition leather; hand-bags with outer surface of composition leather; hand-bags, with outer surface of sheeting of plastics or textile material; (f) ladies bags; jackets, belts, other apparel and clothing accessories of composition leather; footwear with outer soles of rubber, leather or composition leather and uppers of leather; footwear with outer soles of rubber, leather or composition leather and uppers of textile material and other footwear with upper of leather, composition leather, canvas or textile material.
Under SRO 1125, the rate of sales tax for supplies covered in Table II under sub-serial (vii) of Serial No 1 and covered under Serial No 3 shall be 6% where the registered persons are integrated with FBR's online system and data is transmitted to the FBR central database in near real time from such date, mode and manner as may be prescribed by the Board.
As per SRO 776(1)/2018, sales tax shall be charged at the rate of zero percent on import of 200,000 metric tons of potatoes imported during the period commencing on the 5th May, 2014 and ending on the 31st July, 2014 (both days inclusive).