ST, FED taxation measures taken in Budget 2016-17

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ISLAMABAD, June 3 (APP): The budgetary measures pertaining to Sales
Tax and Federal Excise Duty in the Federal Budget (2016-17) primarily aim at:
1. Zero-rating of export oriented sectors. Five export-oriented
sectors are subject to reduced rates i.e. 3% and 5% under SRO 1125(I)/2011, dated 31.12.2011.
In order to facilitate the exporters and provide for a No-Tax, No-Refund
Regime, the items as specified in the said SRO and the purchase of energy i.e. electricity, gas, furnace oil and coal by the five export-oriented, are to be subjected to zero-rate of sales tax. The retail sales of locally manufactured finished goods of these sectors are to be subjected to sales tax @ 5%.
Enforcement through SRO, effective from 01.07.2016.
2. Exemption of sales tax on pesticides. Ministry of National Food
Security and Research has proposed exemption from sales tax on Pesticides. Keeping in view importance of pesticides for the agriculture sector, pesticides and their ingredients are being granted exemption from sales tax.
Enforced through Finance Bill, 2016, effective from 01.07.2016.
3. Exemption of sales tax on Premixes for Growth Stunting.
Ministry of National Health Services has proposed exemption from sales tax on the import of vitamins, premixes, minerals and micronutrients (food grade) to combat growth stunting. These items are being granted exemption from sales tax.
Enforced through Finance Bill, 2016, effective from
01.07.2016.
4. Exemption of sales tax on import of Laptops and PCs.
Ministry of Information Technology has proposed exemption of sales tax on laptops and personal computers with a view to promoting Information & Communication Technology (ICTs).
Exemption from sales tax to Laptops and Personal Computers is being
granted. This step will also promote genuine imports and will render informal and illegal imports as uncompetitive.
Enforced through Finance Bill, 2016, effective from 01.07.2016.
5. Increase in turnover threshold for cottage industry.
Cottage industry is exempted from payment of sales tax. Turnover threshold prescribed for cottage industry is Rs 5 million.
This low turnover threshold causes undue hardships and registration
requirements for small manufactures who make minimal contributions to revenues.Turnover threshold for cottage industry is being raised to Rs. 10 million. Enforced through Finance Bill, 2016, effective from 01.07.2016.
6. Exclusion of Secondhand and Worn Clothing from further tax
levy. Sales tax is currently levied @ 5% on the import stage, @ 3% as value addition tax and 2% as further tax under section 3(1A) on second hand and worn clothing, which results in cumulative impact of sales tax at 10%. In order to provide relief to the low income segment, using second hand worn
clothing, exemption from further tax is being provided. Enforcement through
SRO, effective from 01.07.2016.
7. FED at 16% is leviable on services such as Advertisement on
CCTV / Cable TV, Shipping Agents, Banking Companies, Insurance
Companies, Cooperative Financing Societies, Modarbas,
Musharikas, Franchise Services, Stevedores, Stock Brokers,
Forex Dealers etc. Provinces and various Chambers of Commerce
& Industry have demanded withdrawal of FED on such services as
provinces are already charging sales tax on these services.
FED on these services on which provinces are collecting sales
tax is being withdrawn.
Enforced through Finance Bill, 2016, effective from
01.07.2016.
8. Exemption to Dump Trucks for Thar Coal Field. Exemption to
coal mining machinery, equipment, spares, etc. for Thar Coal
Field as provided in the Sixth Schedule to the Sales Tax Act,
1990 includes vehicles for site use i.e. single or double
cabin pick-ups. Dump trucks, although being vehicles for site
use, are not covered under the said provision. Exemption from
sales tax is, therefore, being granted to dump trucks.
Enforced through Finance Bill, 2016, effective from
01.07.2016.
9. Exemption from sales tax and Federal Excise Duty to
Concession Holder of Gwadar Port Authority and its operating
companies, their contractors and subcontractors for development of Gwadar Port and Gwadar Free Zone. Exemption from sales tax and Federal Excise Duty for a period of 40 years on the import and supply of materials, equipment, ship bunker oils brought and sold to ships calling on/visiting
Gwadar Port, for the development of Gwadar Port and Free Zone
for Gwadar Port is being granted.
Enforced through Finance Bill, 2016, effective from
01.07.2016.
10. Exemption from sales tax and Federal Excise Duty to businesses to be
established in Gwadar Free Zone. Exemption for a period of 23 years from sales tax and Federal Excise Duty is being granted to businesses to be established in Gwadar Free Zone. This exemption shall be available to
sales/supplies within the Gwadar Free Zone. However, sales/supplies outside the free zone and into the territory of Pakistan shall be subjected to applicable rates of sales tax and Federal Excise Duty.
Enforced through Finance Bill, 2016, effective from 01.07.2016.
11. Exemption to machinery and equipment for the development of grain
handling and storage facilities is available under the Sales Tax Act, 1990. It is proposed to include silos in the said exemption.
Enforced through Finance Bill, 2016, effective from 01.07.2016.
12. Abolition of zero-rated status of stationery items. Stationery items
are exempt from sales tax under the Sixth Schedule to the Sales Tax Act, 1990 as well as zero-rated under the Fifth Schedule thereof.
It is proposed to withdraw zero-rating on stationery items and their
inputs.
Enforced through Finance Bill, 2016, effective from 01.07.2016.
13. Abolition of zero-rated status of Milk. Milk, fat-filled milk and
preparations for infant use have been enjoying zero-rating facility on supplies for many years. It is proposed to withdraw zero-rating on milk and fat filled milk. Zero-rating on preparations for infant use proposed to be retained.
Enforced through Finance Bill, 2016, effective from 01.07.2016.
14. Enhancement of Federal Excise Duty on Cement. Cement is currently
chargeable to Federal Excise Duty @ 5% of the retail price. It is proposed to replace the current regime with fixed rate basis and to charge FED on cement on fixed rate basis @ Rs. 1/ kg.
Enforced through Finance Bill, 2016, effective from 01.07.2016.
15. (a) Levy of sales tax on sugar at reduced rate of 8%.
Sugar is currently chargeable to Federal Excise Duty @ 8%. It is proposed to replace this Federal Excise Duty with levy of sales tax at reduced sales tax rate of 8%. (b) Levy of sales tax on urea at reduced rate of 5%, in order to promote agriculture and alleviate the conditions of farmers.
Enforced through Finance Bill, 2016, effective from 01.07.2016.
16. Increase in the rate of sales tax on import of Mobile Phones. Mobile
Phones are currently charged to sales tax under three categories i.e. Rs. 300, Rs. 500 and Rs. 1,000, based on their features. The proposed new slabs are Rs. 300, 1000 and 1500, respectively.
Enforced through Finance Bill, 2016, effective from 01.07.2016.
17. Enhancement of rates of Federal Excise Duty on cigarettes.
The rates of FED on cigarettes are proposed to be increased on a bi-annual basis as under:
The ratail price threshold per thousand cigarettes effective
upto 30.11.2016 is proposed to be enhanced from Rs 4,000 to Rs 4,4000 (effective from 1st December 2016).
For cigarettes with retail price equal to or above the threshold, the
proposed rate with effective upto 20.11.2016 has been proposed to be enhanced from Rs 3,436 to Rs 2,705(effective from 1st December 2016). While for cigarettes with retail prices below threshold, the proposed rate with immediate effect upto 30.11.2016 has been proposed to be enhanced from Rs4,000 to Rs4,400(effective from 1st December 2016). Enforced through Finance Bill, 2016, effective from 01.07.2016.
18. Enhancement of Federal Excise Duty on Aerated Waters. The
current rate of Federal Excise Duty on aerated waters is 10.5%. It is proposed to enhance the FED rate to 11.5% of retail price.
Enforced through Finance Bill, 2016, effective from 01.07.2016.
19. Introduction of optional regime for Tier-1 Retailers.
Tier-1 retailers are obliged to pay sales tax at standard rate
after input tax adjustment. It is proposed to provide an
option to these retailers to pay sales tax at fixed rate of 2%
of their total turnover without any input tax adjustments.
Enforced through Finance Bill, 2016, effective from
01.07.2016.
20. Inclusion of mineral/bottled water in the Third Schedule to the
Sales Tax Act, 1990. Mineral water is charged to sales tax at 17% of value of supply. It is proposed to include mineral water in the Third Schedule so that the tax is charged on the basis of retail price.
Enforced through Finance Bill, 2016, effective from 01.07.2016.
21. Enhancement of rate of sales tax on certain ingredients of
poultry feed. Poultry feed and its certain ingredients are
exempt from sales tax whereas certain other ingredients are
subject to sales tax @ 5% ad valorem. It is proposed to
increase the rate of sales tax on the latter category from 5%
to 10%.
Enforced through Finance Bill, 2016, effective from
01.07.2016.
22. Marble Cutting and Polishing Industry. Marble Industry is
mostly unregistered and is not paying sales tax. This sector
has electricity as a major input. In order to bring this
sector in the ambit of sales tax, it is proposed to charge
sales tax @ Rs. 1.25 per KWH of electricity consumed. The
proposed tax shall be in addition to standard sales tax @ 17%
on supply of electricity as well as extra tax @ 5%.
Enforced through amendment in the Sales Tax Special Procedure
Rules, 2007, effective from 01.07.2016.
23. Enhancement of fixed rate basis on steel sector, ship
breakers and steel melters. Sales tax on steel sector,
including ship-breaking sector, is collected on fixed rate
basis. Sales tax from steel melters and re-rollers is
collected on the basis of electricity consumption whereas
ship-breakers are paying sales tax on the basis of LDT of
ships imported for breaking. These rates are proposed to be
revised upwards.
Enforced through amendment in the Sales Tax Special Procedure
Rules, 2007, effective from 01.07.2016.
24. Rationalization of exemption available to plant, machinery,
equipment, etc. for production of Bio-Diesel.Exemption to plant, machinery, equipment and specific items used in production of bio-diesel is available under the Sales Tax Act, 1990. To preclude the possibility of misuse, it is
proposed to exclude “specific items” from this exemption.
Enforced through Finance Bill, 2016, effective from
01.07.2016.