Imports by zero-rated sectors, commercial importers: revised ST regime likely from January 1

the Federal Board of Revenue (FBR) is expected to implement the revised sales tax zero-rating regime for five leading export sectors and commercial importers from January 1, 2012. Sources told Business Recorder here on Saturday that the FBR has drafted a statutory regulatory order (SRO) on revised zero-rated regime to be applicable from January 1, 2012.
Earlier, deadline for implementation of the revised notification was December 15, 2011. Now, the new notification would be implemented from January 1, 2012 with active consultation of all stakeholders. The final version of the notification, pertaining to the revamped sales tax zero-rating regime, would cover procedure for submission and encashment of post-dated cheques by the commercial importers.
The revised zero-rated regime would also cover the detailed procedure for payment of sales tax by commercial importers. It would highlight the procedure for commercial importers to specify conditions for submission of financial guarantees on imports and supply of raw materials and inputs for different sectors.
So far, the Board has proposed imposition of 19 percent sales tax ie 16 percent standard rate of sales tax and 3 percent sales tax on value-addition on the commercial importers engaged in import of raw materials and inputs in the name of five zero-rated sectors, but actually supplied to un-registered persons or manufacturers of non-zero rated sectors.
Under the zero-rated scheme, the current facility of zero-rating shall be available at the time of import as well as for local supply chain, except at the retail stage. At the time of import, sales tax @ 0 percent shall be charged from registered persons of five zero-rated sectors. At the time of import no sales tax shall be charged from commercial importers but guarantee (in the form of good for payment cheque or pay order or bank guarantee or cash) shall be required. The guarantee shall be released on subsequent supply of the imported items to registered persons within the five zero-rated sectors.
An important condition of the notification is that if imported goods are supplied to unregistered persons or to manufacturers of non-zero-rated sectors, then sales tax @ 16 percent along with value-addition tax 3 percent shall be charged on such supplies and this amount of tax shall be deposited in exchequer and thereafter the guarantee shall be released.
According to the draft of the notification, the commercial importer shall submit cheque or bank guarantee or pay order or pay in cash the amount equal to the amount of sales tax at the rate of 16 percent payable at import stage and 3 percent value-addition sales tax.
This 'good for payment' cheque or bank guarantee or pay order or cash would be returned or, as the case may be, refunded after providing evidence of next supply. In case where the commercial importer sells any imported goods to persons registered in the five sectors within subsequent three months, such supply shall be exempt from sales tax, but the commercial importers shall be required to provide details of each and every invoice in the sales tax return.
On the basis of these details, the 'good for payment' cheque or bank guarantee or pay order or cash furnished shall be returned back or as the case may be refunded. In case where the commercial importer sells any imported good to unregistered persons or persons registered in non-zero rated sectors (other than five sectors) within subsequent three months, he shall charge and pay sales tax at the rate of 16 percent of the value of such supply and value-addition tax at the rate of 3 percent of the import value at the time of such supply. This amount shall be deposited on monthly basis along with the sales tax return. On the basis of furnishing proof of such payment, the 'good for payment' cheque or bank guarantee or pay order or cash shall be released.
The commercial importer shall be required to provide details of each such sale to the unregistered persons or persons registered in non-zero rated sectors in the sales tax return. The draft notification further said that the goods imported by all other importers (other than registered manufacturers of five sectors and commercial importers) shall be charged at the rate of 16 percent.