FBR may propose 16 percent sales tax on mineral water

[LahoreEstate]

RECORDER REPORT
ISLAMABAD (June 08 2009): The Federal Board of Revenue (FBR) may include mineral water in the Third Schedule of the Sales Tax Act 1990 to charge 16 percent sales tax on the basis of printed retail price from the next fiscal (2009-10). Sources told Business Recorder on Saturday that presently mineral water was liable to 15 percent sales tax.

One of the revenue generation measures may be inclusion of this consumer item in the Third Schedule for increasing sales tax collection from 2009-10. The sales tax on mineral water is being charged on the value of supply, but there is no requirement for printing of the retail price.

In case mineral water is included in the Third Schedule, manufacturers would pay sales tax of all stages of the value-addition from next fiscal. The FBR has drafted a budget proposal to expand list of consumer products, sold in packing, on which sales tax is being charged on the basis of printed retail price from next fiscal. The collection of sales tax under Third Schedule would be a kind of advance sales tax where all sales tax of supply would be collected at the first stage of manufacturing. This tax is collected at the time of supply whether supplied to wholesalers or retailers by the manufacturers.

The sources said that the manufacturers had to pay sales tax on all the stages of value-addition of consumer items, having printed retail price. Under the Value Added Tax (VAT) regime, the tax is to be paid on value-addition attributed to each stage, starting from manufacturing down to retail sale to the end consumer.

A number of dealers, distributors and wholesalers of different consumer items are still out of tax net despite efforts to bring the intermediate linkages in supply chain into the taxation system and resultantly the tax actually chargeable at each stage on value-addition is not being recovered, the sources stated.

The board may expand the Third Schedule of the Sales Tax Act, 1990 to include more items, which are sold in packing with declared retail price.

Presently, sales tax is charged on certain items sold in packing with printed retail price. Once the items sold in packing are brought under the Third Schedule, the manufacture will pay the sales tax of all the stages of value-addition and only one printed retail price has to be paid by the end consumer.

Since there are certain consumer items on which the sales tax collection is not satisfactory, the board would, therefor, use Third Schedule to improve GST collection by charging sales tax on the basis of printed retail price, the sources added.

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