The Pakistan Chemicals and Dyes Merchants Association (PCDMA) has suggested that withholding tax should be charged on value excluding sales tax at import and supply stages. Vice Chairman of PCDMA, Imran Ghayasuddin while presenting the association's budget proposals for the year 2010-11, said that income tax was being charged at both import and supply stages after including sales tax in the value on which the withholding tax is being charged.
It is clearly a "tax on tax" and against the rationale of good taxation. The association has recommended that the rate of withholding income tax should be one percent instead of 3.5 percent, as income tax is already charged on these goods at import stage. It has also been suggested that withholding tax on all raw materials other than 5 export industrial items should be one percent. On finished and consumer products it should be 5 percent at port.
This measure will save industry and unemployment from devastating competition dumping outside countries, he added. The association pointed out an anomaly that natural raw rubber (PCT 4001-2200) technically specified as natural rubber (TSNR), which is processed raw material and sales tax on it is zero percent while sales tax on basic raw material used for making processed raw materials ie smoke sheet PCTY No 4001-2100 and other of PCT 4001-2900 is 15 percent.
Income tax rate on synthetic rubber PCT Nos 4002-1900 and 4002-2000 is zero whereas sales tax on PCT 4002-3100, 4002-3900, 4002-4900. 4002-5900 and 4002-7000 are charged at the rate of 16 percent. "All these products are similar in nature and end use. Therefore, rate of sales tax on all these PCTs should be zero," he demanded. The association further suggested that prevailing custom tariff of 10 percent on oxides of boron, boric acid, magnesium hydroxide, iron hydroxides, earth colours, bicarbonate of ammonium, oxalic acid and citric acid be reduced to 5 percent.
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