Sales tax collection at local stage: Petroleum products remain top contributor

The petroleum products remained top contributor of sales tax collection at local stage, which has yielded Rs 29.1 billion July-September, 2010-2011 against Rs 26.7 billion during the corresponding period of last year. The FBR latest analysis on sales tax collection on domestic consumption showed that the collection from petroleum products has recorded a growth of 8.7 percent during the period under review, as compared to collection of the same period last year.
The growth is partially attributable to low input/output ratio during first quarter of 2010-11 as compared to previous year. The report said that the contribution of domestic sales tax collection has been over 50 percent in total sales tax collection. Ten major commodities continued to contribute a higher proportion of around 88 percent, in overall sales tax domestic collection. These ten sectors are petroleum products, telecommunication, natural gas, sugar, electrical energy, cigarettes, other services, beverages, cement and motor cars. The cumulative collection from these 10 major commodities during first quarter of the current fiscal has been Rs 61.6 billion as against Rs 58.4 billion during the same period of last year. The growth has been recorded at 4 percent.
The second higher revenue spinner is telecommunication sector, which has registered a positive growth of only 6.1 percent during first quarter of 2010-2011. It has been observed that for the last couple of years, the growth in the collection of telecommunication has slowed down possibly due to reduction in tax rates from 21 percent to 19.5 percent and saturation of mobile connectivity in urban areas.
The other revenue spinner is natural gas, the collection has declined marginally mainly due to payment of Rs 1.4 billion refunds during July-September, 2010-11 as compared to nil payment during the same period of previous year. A growth of 10.6 percent in collection from cigarettes has been attained, mainly due to 6.5 percent growth in the taxable sales of cigarettes and reduction in the input out ratio from 57.5 percent in first quarter 2009-10 to 53 percent during July-September, 2010-11. The collection of sales tax from electrical energy has increased by only one percent during first quarter 2010-11. The reason for slow growth has been payment of higher refunds by around one billion rupees in first quarter of 2010-11 as compared to the previous year. The collection from services (other than telecom) indicated a robust growth of 66 percent. A growth of 27 percent has been reflected by the beverages sector, mainly due to lower input/out ratio from 77.8 percent to 70.8 percent and higher sales by 10.1 percent.
As far as the collection of sugar is concerned, the rate of 15 percent was in operation in the first half of first quarter, 2009-10 which is 8 percent during 2010-11. Moreover, higher input-output ratio 25.3 percent on account of sugar during 2010-11 against 9.5 percent has also affected the collection of sales tax on domestic. A decline of 47.5 percent in the collection of cement is attributable to a decline of 20.5 percent in the taxable sales and higher input-out ratio during first quarter of 2010-11 as compared to previous year, FBR report added.