The Federal Board of Revenue has proposed enhancement in the sales tax rate from 16 to 20 percent on supply of electricity and natural gas to all industrial and commercial consumers to encourage voluntary registration and documentation.
It is learnt here on Friday that one of the budget proposals of the FBR is to introduce the enhanced rate of sales tax on electricity and gas for industrial and commercial consumers. At present, the sales tax is charged at standard rate of 16 percent on supplies of electricity and natural gas to all types of consumers (industrial, commercial, domestic). Majority of industrial and commercial consumers remain outside the ambit of sales tax.
It is, therefore, proposed that the supply of electricity and gas to all industrial and commercial consumers may be charged to sales tax @ 20 percent. This will add no burden to registered persons as they will adjust the whole amount and will encourage voluntary registration and documentation. The proposal has been forwarded to the Ministry of Finance for consideration in the upcoming budget, proposal added.
Another budget proposal of the FBR is to expand the withholding regime of sales tax in the next fiscal year. Currently under the sales tax withholding regime, one-fifth of the sales tax is withheld by registered persons against supply received from registered persons. In case of government sector, 100 percent withholding is done in case of purchases from unregistered persons.
It is proposed that the government departments may withhold 100 percent of the sales tax on purchases from registered persons. All withholding agents may withhold 100 percent of sales tax on purchases of taxable goods from unregistered persons, sources added.
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