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The Federal Board of Revenue (FBR) has finalised rules for collection of 'capacity tax' from the beverages industry from July 1 this year. Sources told this correspondent on Thursday that the rules would be notified following vetting from the Law and Justice Division. The beverages manufacturers would be given an option to either pay 'capacity tax' in accordance with their production capacity or pay enhanced rate of Federal Excise Duty from July 1.
The draft of new rules contained a detailed mechanism for collection of taxes on the basis of production capacity of the beverage products. The rate of federal excise duty on aerated waters has been enhanced from 6% to 9% by amending S. No 4, 5 and 6 of Table I of the First Schedule of the Federal Excise Act, 2005. This enhanced rate has not been made effective from June 13, 2013, but shall come into effect on July 1, 2013. The rules were prepared in view of the current contribution of the FED and the sales tax by the beverage industry.
The FBR and the industry thoroughly discussed the new concept of 'capacity tax'. The revenue impact of existing rationalisation of taxes (sales tax and FED) on the industry and 'capacity tax' was taken into account for finalisation of the rules. Being a revenue generation measure, it is under consideration to propose a 'capacity tax' on the industry to generate additional revenue during the next fiscal year, sources said. In the presence of 'capacity tax', the Board would have to do away with the existing FED collection mechanism on the beverage industry.

Copyright Business Recorder, 2013

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