Supplies to unregistered persons: Reduction in rate of further ST under study

The government is planning to reduce the rate of further sales tax from existing three percent to two or one percent on supplies made to unregistered persons in the coming budget (2010-2021).

Sources told Business Recorder here on Monday that the budget makers were planning to propose to the government, incentives for business and trade in budget (2020-2021). Within the sales tax regime, various relief measures are under consideration.

The Federal Board of Revenue (FBR) is also examining the possibility of restoring reduced rate of sales tax on five export sectors, which were earlier zero-rated.

The FBR is analyzing the revenue implications of any move to reduce sales tax on textile and other export sectors from 17 to five percent or any other lower rate of sales tax.

The FBR in principle has agreed to reduce three percent further sales tax on supplies made to unregistered persons in budget (2020-2021), the sources added. On March 5, 2020, the FBR had informed the Standing Committee on Finance at the Parliament House that the FBR was ready to reduce or abolish three percent further sales tax on supplies made to unregistered persons in case the businessmen were willing to get themselves registered with the Sales Tax Department. Tax authorities informed that the three percent further sales tax was imposed to encourage new registrations and voluntary compliance. To increase sales tax registrations, the government had imposed three percent further sales tax on the supplies made to the un-registered persons.

The FBR has received Rs40 billion on account of further sales tax deposited by the un-registered persons.

The un-registered persons are paying additional three percent further sales tax along with the 17 percent standard sales tax.

If people are ready to come for sales tax registration, the government can reduce or abolish the further sales tax, the tax authorities added.

Responding to this, the representatives of the business and trade contested that the FBR itself provided a window of three percent further sales tax from un-registered persons, discouraging registration and documentation.