TUESDAY JANUARY 18: Rs 647.9 billion budgetary target: Rs 393.55 billion sales tax needed in second-half

ISLAMABAD: The Federal Board of Revenue (FBR) has to collect Rs 393.55 billion sales tax in the second half (January-June) 2010-11 to meet the budgetary target of Rs 647.900 billion for current fiscal year. Sources told Business Recorder here on Monday that the provisional sales tax collection stood at Rs 281.350 billion during the first half of (July-December) 2010-11 against annual sales tax target of Rs 647.900 billion.
The amount of Rs 281.350 billion sales tax collection has been based on provisional data received from the field formations compiled till January 17, 2010. At the time of budget (2010-11), the government had fixed Rs 674.900 billion and Rs 153.600 billion as sales tax and federal excise duty (FED) targets for 2010-11.
The revenue target for 2010-11 was originally budgeted at Rs 1667 billion, but later it was rationalised in the light of overall budgetary framework of the government. The FBR has now been assigned a target of Rs 1,604.4 billion that required 21 percent growth over last year's collection of Rs 1327.4 billion. The direct taxes will remain top contributor by having 40.9 percent share in the assigned national target on the other hand the net collection of sales tax would be around 39.5 percent, followed by customs duty with a share of 10.8 percent, and the rest will be contributed by FED.
The sales tax target has been slashed from Rs 647.900 billion to Rs 633.8 billion for 2010-11 keeping in view overall rationalisation of revenue collection target. Similarly, the target of FED was also brought down from Rs 153.600 billion to Rs 141 billion for this period.
When compared with downward revised target, the FBR has to collect Rs 352.45 billion in the remaining six months of current fiscal, as provisional collection of sales tax was Rs 281.350 billion against revised target of Rs 633.8 billion. Traditionally, it has been observed that the last two quarters of a fiscal generate more than 60 percent of the revenue. In view of provisional sales tax collection of Rs 281.350 billion during first six months of 2010-11, the remaining amount of Rs 352.45 billion has to be generated in the remaining period of current fiscal.
Following delay in the introduction of the reformed general sales tax (RGST) till next fiscal, the FBR would not be able to collect additional sales tax due to withdrawal of exemptions, zero-rating and distortions in the sales tax regime. According to sales tax data, the Board has provisionally collected Rs 281.350 billion as sales tax during the first half of (July-December) 2010-2011 against 242.871 billion in the same period last fiscal year, reflecting an increase of 15.8 percent.
The latest data further revealed that the total indirect taxes collection stood at Rs 240.877 billion during first six months of current fiscal against Rs 211.401 billion in the corresponding period last fiscal, reflecting a growth of 13.9 percent. Break-up of July-December 2010-11 collection revealed that the FBR has provisionally collected Rs 142.051 billion as sales tax on the import stage during this period as compared to Rs 109.277 billion in the same period last fiscal, reflecting an increase of 30 percent. The sales tax collection on domestic consumption amounted to Rs 139.299 billion against Rs 133.593 billion in the same period last fiscal, depicting growth of 4.3 percent.
The collection of federal excise duty (FED) was Rs 58.147 billion during July-December 2010-11 against Rs 56.656 billion in the same period last fiscal, showing an improvement of 2.6 percent. The FED collection at the import stage was Rs 7.933 million whereas the FED collection on domestic consumption was Rs 50.214 billion.
The FBR has paid Rs 22.636 billion as sales tax refund during July-December 2010-2011 as compared to Rs 9.200 billion during the same period last fiscal, reflecting a growth of 15.8 percent. There is an increase in the overall payments of sales tax refunds during July-December (2010-11) as compared to previous fiscal year. The FBR has collected Rs 80.027 billion as customs duty during the period under review as compared to Rs 71.248 billion in the same period last fiscal, showing an increase of 12.3 percent.
The FBR data further revealed that the contribution of domestic sales tax collection has been over 50 percent in total sales tax collection. Ten major commodities continued to contribute a higher proportion of around 88 percent, in overall sales tax domestic collection. These ten sectors are petroleum products, telecommunication, natural gas, sugar, electrical energy, cigarettes, other services, beverages, cement and motor cars. The cumulative collection from these 10 major commodities during first quarter of current fiscal has been Rs 61.6 billion against Rs 58.4 billion during the same period of last year. The top contributor is the POL Product, which has yielded Rs 29.1 billion July-September, 2010-11, as against Rs 26.7 billion during the corresponding period of last year. The collection from petroleum products has recorded a growth of 8.7 percent during the period under review, as compared to collection of same period last year. The growth is partially attributable to low input/output ratio during first quarter of 2010-11 as compared to previous year.
The second higher revenue spinner is telecommunication sector, which has registered a positive growth of only 6.1 percent during first quarter 2010-11. During last few years, the growth in the collection of telecommunication has slowed down possibly due to reduction in tax rates from 21 percent to 19.5 percent and saturation of mobile connectivity in urban areas.
The other revenue spinner is natural gas, the collection has declined marginally mainly due to payment of Rs 1.4 billion refunds during July-September, 2010-11 as compared to nil payment during the same period of previous year. A growth of 10.6 percent in collection from cigarettes has been attained, mainly due to 6.5 percent growth in the taxable sales of cigarettes and reduction in the input out ratio from 57.5 percent in first quarter 2009-10 to 53 percent during July-September, 2010-11. The collection of sales tax from electrical energy has increased by only one percent during first quarter 2010-11. The reason for slow growth has been payment of higher refunds by around one billion rupees in first quarter of 2010-11 as compared to the previous year. The collection from services (other than telecom) indicated a robust growth of 66 percent. A growth of 27 percent has been reflected by the beverages sector, mainly due to lower input/out ratio from 77.8 percent to 70.8 percent and higher sales by 10.1 percent.
As far as the collection of sugar is concerned, the rate of 15 percent was in operation in the first half of first quarter, 2009-10 which is 8 percent during 2010-11. Moreover, higher input-output ratio 25.3 percent on account of sugar during 2010-11 against 9.5 percent has also affected the collection of sales tax on domestic. A decline of 47.5 percent in the collection of cement is attributable to a decline of 20.5 percent in the taxable sales and higher input-out ratio during first quarter of 2010-11 as compared to previous year.
The FBR data further disclosed that major 10 commodities groups have generated almost 78 percent of the sales tax collection at imports. Petroleum products have contributed around 33 percent in the total sales tax at import stage, followed by edible oil (10 percent) etc. However, the collection from POL products has come down from 34 percent during 2010-11 from 41 percent during corresponding period last year. A higher growth of 80 percent in the collection of edible oil has been generated during July-September, 2010-11 due to 88 percent growth in its imports. Similarly, the collection from plastic products has decreased by 44 percent against 37.3 percent growth in imports. Automobile remained fourth major and significant revenue spinner of sales tax on imports. Its collection improved by 56.6 percent, which has driven by higher growth of 38.2 percent in the imports. As far as the remaining items are concerned, all of them have generated double digit growth in the collection of sales tax except organic chemicals, which is due to higher growth in the imports of these items, the FBR data added.