Turnover tax: Rs 3.7 billion shortfall in July-January collection

The Federal Board of Revenue collected Rs 2.3 billion after increase in turnover tax from 0.5 to one percent through Finance Act 2010 against projected figure of Rs 6 billion during July-January (2010-11), reflecting a shortfall of Rs 3.7 billion.
Sources told Business Recorder here on Tuesday that the collection of turnover tax stood at Rs 0.5 billion during the corresponding period of last fiscal year. However, the target of Rs 6 billion might not be achieved keeping in view exemptions granted to different sectors due to levy of one percent turnover tax.
During 2010-11, turnover tax was reduced from one percent to 0.5 percent for refineries and oil marketing companies (OMCs). The levy is also expected to be reduced for flourmills and the Board had also allowed 80 percent reduction in turnover tax liability of the pharmaceutical distributors, distributors of fast moving consumer goods and distributors of fertilisers.
The FBR analysis on tax measures revealed that the FBR had estimated revenue loss of Rs 3 billion due to enhancement of exemption limit for salaried individuals and non-salaried from Rs 2 million to Rs 3 million. The FBR has collected Rs 33.8 billion from salaried individuals during July-January (2010-11) against the projected figure of Rs 27.5 billion, reflecting an increase of Rs 6.3 billion.
Although exemption limited has been increased in budget (2010-11), the rise in revenue collection is due to increase in salaries. Secondly, now the maximum tax rate of 20 percent is now applicable from Rs 4.55 million rather than Rs 8.55 million. Therefore, the FBR has generated an additional amount of Rs 6.3 billion from salaried individuals against the projected figure of revenue loss of Rs 3 billion during this period.
The FBR had worked out revenue loss of Rs 2 billion during 2010-11 following announcement of the tax relief package to Khyber Pakhtunkhwa (KPK), Federally Administered tribal Areas (Fata) and Provincially Administered Tribal Areas (Pata). So far, the FBR has said that it would be difficult to assess the revenue impact at this stage due to prevailing law and order situation in these areas.
The FBR had estimated revenue loss of Rs 4.50 billion during 2010-2011 following reduction in withholding tax rate on electricity bills of commercial and industrial consumers. On the other hand, the FBR has collected Rs 7.9 billion during July-January (2010-11) against Rs 8.2 billion in the corresponding period last fiscal, reflecting a decrease of Rs 0.3 billion.
As compared to the projected revenue loss of Rs 4.50 billion under this head, there is only marginal revenue loss of Rs 0.3 billion from reduction in withholding tax rate on electricity bills of commercial and industrial consumers during the period under review.