Sales tax collection declines by 15.29 percent

A decrease of Rs 1.747 billion or 15.29 percent in the collection of sales tax during the last fiscal year has been reported by the Sales Tax House Karachi.
According to official figures made available to Business Recorder here on Tuesday by the department, Rs 11.42 billion were collected in the last fiscal year 2005-06 as compared to Rs 13.167 billion during the fiscal year 2004-05.
The collection decreased due to government's decision to allow zero rated sales tax on import of raw material for the exporting units to promote business in the country.
The official said that major exporting units like textile, leather, sports goods, surgical and carpet were the main contributors towards total sales tax collection. The zero rated tax facility on imports of raw materials hit the growth of sales tax in the last fiscal year, the official added.
He said that the target of sales tax was revised downwards and fixed at Rs 11.335 billion for 2005-2006 taking into consideration the fact that the zero percent facility was destined to bring down the collection. Despite these developments, the collection last fiscal year showed a surplus of Rs 85 million than the target, he said.
The government had proposed in the budget 2005-06 the scheme for the export industry by reducing sales tax to zero percent on the import and supply of all items/goods and services utilised in carpets, textile, leather and surgical industries. This had eliminated approximate 60-65 percent of the overall quantum of accumulated sales tax refunds due to levy of GST.
Under the WTO regime, the government was required to give maximum relief to outer integration of textile and other industries.
Textile provides over 60 percent of national exports and employment to a large chunk of skilled and unskilled labour. Major textile outputs like raw cotton, yarn, fabrics and made-ups are exported leaving a nominal quantity for domestic consumption.
The initiative taken in the budget 2005-06 showed the government had realised that it was not only losing much more in export rebates and duty drawbacks on account of over-invoiced exports then collecting sales tax on local sales of five key industrial sectors namely: textile, carpets, leather, surgical and sports goods.