Govt imposes 16% GST on 21 items

[Lahore_Real_Estate]

ISLAMABAD: The federal government has imposed 16 percent general sales tax (GST) on 21 items, abolished regulatory duty on 397 luxury items and special excise duty on all items, and withdrew federal excise duty (FED) on 15 items, explained tax authorities after the announcement of the national budget 2011-12 on Friday.

Reportedly, in the upcoming financial year, the rate of GST has been reduced from 17 to 16 percent, which would help bring prices of many products and services down.

The Federal Board of Revenue (FBR) has combined 4-6 percent of sales tax on local supplies of five zero-rated sectors into a single rate of 5 percent.

FBR’s Inland Revenue member Khawar Khurshid Butt told media that now three rates of sales tax would be applicable ie 0, 5, 16 percent.

The existing 4-6 percent sales tax applicable on local supplies of five export-oriented sectors has been combined into a single rate of 5 percent.

To a question, he said that there was no change in the tax structure of Capital Gains Tax (CGT) on stock exchanges.

The FBR has imposed 16 percent sales tax on 21 items, including defence stores, computer software, ships, bulldozers, harvesters, CNG kits and mineral oil.

The Finance Bill 2011-2012 issued on Friday has excluded 21 items from the 6th Schedule of the Sales Tax Act for withdrawal of exemptions. The FBR has withdrawn exemption of sales tax on defence stores at import and local supply to bring it in line with the international best practices.

The GST exemptions have been withdrawn on surgical tapes, ultrasound gel, diapers for adults (patients), bricks and building blocks of cement, computer software, ambulances, firefighting vehicles, waste disposal trucks, vehicles for maintenance of streetlights and overhead cables, aircraft, ships of gross tonnage exceeding 15 LDTs, excluding those for recreational or pleasure purpose, defence stores, whether manufactured locally or imported by the federal government against foreign exchange allocation for defence, including trucks, trailers and vehicles falling under PCT heading 87.04 of the 1st Schedule to the Customs Act 1969 (IV of 1969), specially modified for mounting defence equipments, their parts and accessories for supply to the armed forces, spare parts and equipment for aircraft and ships covered by serial number 43 and 44 above, equipment and machinery for pilot-age, salvage or towage for use in ports or airports, equipment and machinery for air navigation, equipment and machinery used for services provided for handling of ships or aircrafts in a customs port or customs airport, such plant and machinery as is notified by the federal government in the official gazette but if imported, these shall be entitled to exemption from sales tax on importation if these are not manufactured in Pakistan.

The sales tax exemption has also been withdrawn on bulldozers and combined harvesters and components (which include sub-components, components, sub-assemblies an assemblies but exclude consumables) imported in any kit form and direct materials or assembly or manufacture thereof, subject to the same conditions as are envisaged for the purposes of exemption under the Customs Act 1969 (IV of 1969) and import and supply of fully dedicated CNG Euro-2 buses whether in CBU or CKD condition.

Through withdrawal of SRO based exemption, the government has imposed sales tax on CNG kits, cylinders, valves, etc, commercial catalogues, rock phosphate, Phosphoric Acid and mineral Oil 97 percent (PCT heading 2710.0000) imported by importers, formulators or manufacturers pesticides.

The FBR has also withdrawn federal excise duty (FED) on 15 items by deleting these items from the First Schedule of the Federal Excise Act 1990.

The FED has been abolished on solvent oil (non-composite), other fuel oils, mineral greases, transformer oil, other mineral oil excluding sewing machine oil, waste oil, carbon black oil (carbon black feedstock), Methyl tertiary butyl ether (MBTE), greases, organic composite solvents and thinners not elsewhere specified or included, prepared paint or varnish removers (i) solvent (composite) (ii) other (excluding thinners), viscose staple fiber, motor cars and other, motor vehicles principally designed for the transport of persons.

Regulatory duty on 392 out of 397 items is being abolished. Custom duty on 22 essential raw materials for the pharma industry used for producing anti-biotic, anti allergic, anti-diabetic and TB medicines are being reduced substantially.

There is no extension in the duration of the one-off taxes levied due to floods: 15 percent surcharge on income tax and 1.5 percent increase in special excise duty. No increase has been announced on custom duty on any product.