FBR analysis of one-year collections: ST collection on services sans telecom posts 158 percent growth in fiscal year 2009-10

The services excluding telecom sector has been the fourth major revenue generation source of sales tax on domestic consumption during 2009-2010. According to the FBR analysis of one-year collections issued on Saturday, the services sector except telecom services is the fourth major revenue generation source of sales tax on domestic.
Its collection has grown robustly by 158 percent during 2009-10. There are genuine factors for this colossal growth in the revenue realisation of other services. Two prolific services ie banking/non-banking and insurance services were transferred from FED to sales tax net in the Budget 2009-10. Moreover, new services like services rendered by port & terminals and stock brokers were also brought into the fold of sales tax. Resultantly, the share of other services in the sales tax domestic has gone up from 2.6 percent in 2008-09 to 6.2 percent in 2009-10.
Major 10 commodities contribute 87.9 percent of the total net sales tax from domestic. The major revenue spinners of sales tax domestic include petroleum products, telecom services, natural gas, other services, cigarettes, sugar, electrical energy, beverages, tea and cement.
Petroleum is the top revenue generation source of sales domestic and contributed around 42 percent of the total sales tax domestic during 2009-10. Its collection grew by 7.1 percent. The refunds payments in the petroleum products have gone up from one billion rupees in 2008-09 to Rs 2.1 billion during 2009-10. The collection from telecom sector has dropped by around 11 percent due to reduction of tax rates from 21 percent to 19.5 percent in the Budget 2009-10. As far as natural gas is concerned; the collection has declined by 1.2 percent.
The collection of cigarettes grew by only 11.1 percent during 2009-10. The growth seems below the expectation, as the rate of FED was also revised upward in the Budget 2009-10. On the other hand, cement has reflected a decline of 15 percent in the collection of sales tax domestic. One of the reasons for this decline is lowering of FED rates on cement in the Budget 2009-10.
The collection realised from sugar has come down by 22.4 percent mainly due to slashing down of sales tax rate on sugar by 50 percent since early 2009-10. This has not only vastly affected the collection of sugar but also adversely impacted overall collection of sales tax domestic.
Sales tax on imports is a significant component of federal tax receipts. The collection of sales tax has posted an increase of 21.3 percent during 2009-10 mainly due to higher collection from petroleum products and automobile. Like sales tax domestic, the receipts of sales tax on imports have also concentrated mainly in few sectors. Petroleum products alone contributed around 40 percent of overall collection of sales tax on imports during 2009-10. Similarly, 10 major spinners including petroleum constitute 82.4 percent of the sales tax import.
Since petroleum is the major contributor of the sales tax on import, therefore, the overall collection of sales tax on import depends heavily on its level of contribution. The collection of sales tax from petroleum posted a growth of 30.8 percent. This growth is attributable to huge growth in imports of some of the POL products like motor spirit, JP-1 and furnace oil.
Plastic is the second major revenue generation source of sales tax. It has contributed 7.7 percent of the total sales tax on imports. The growth of 14.5 percent in the collection is aligned with its base ie value of imports which grew by 15.4 percent. As far as automobile is concerned, around 49 percent growth in the value of imports of automobile has resulted into around 50 percent growth in the collection of sales tax on imports.
The collection of edible oils has improved by only 5 percent during 2009-10 against overall decline of 3.8 percent in the import of edible oil in 2009-10. This mismatch is mainly due to decline in the imports and collection of two components of palm oil ie R.B.D palm oil and crude palm oil. On the other hand, a huge growth of 75 percent in the imports of palm oilen has resulted in 108 percent growth in its collection. This substantial growth in palm olien has not only compensated for decline in the receipts of R.B.D palm oil and crude palm oil but also improved the collection of overall sales tax imports from edible oil.
The collection of sales tax from mechanical machinery and electrical machinery has improved by 19.9 percent and 11.1 percent while their values of imports have declined by 15.6 percent and 13.2 percent, respectively.
The collection of iron and steel has grown by 16.3 percent against a decline of 2.1 percent in its import. The reason for this mismatch is a decline of 22.3 percent in the imports of a major item in iron and steel ie ferrous wastes and scrap which is mostly zero rated and has not contributed substantially, the analysis added.