TUESDAY NOVEMBER 22: Sales tax rate for five zero-rated sectors: FBR restores status quo ante

ISLAMABAD: The FBR has stopped implementation of the SRO.1012(I)/2011 and temporarily withdrawn 5 percent sales tax on commercial importers and suspended application of single rate of 5 percent sales tax on zero-rated sectors and previous rate of 4-6 percent has been temporarily restored.
Sources told Business Recorder here on Monday that the decision was taken in a meeting between FBR Chairman Salman Siddiq and his team of tax managers with the delegations of Karachi Chamber of Commerce and Industry (KCCI), Pakistan Chemicals & Dyes Merchants Association (PCDMA), Pakistan Yarn Merchant Association and sizing industry from Faisalabad at the FBR House.
Sources said the FBR will issue a notification for business and trade on Tuesday (November 22) that the SRO.1012(I)/2011 has been held in abeyance. Through this notification, the implementation of the SRO.1012 (I)/2011 would be stopped till a consensus is developed among the business and trade on the revised zero-rating regime. "The FBR has send the draft notification to the Law and Justice Division so that the SRO.1012 (I)/2011 could be held in abeyance," sources added.
A business delegation led by Siraj Qasim Teli held detailed discussions with Federal Minister for Finance Dr Hafeez Shaikh and FBR Chairman Salman Siddiq, at Ministry of Finance and the FBR. According to sources, the tax authorities have patiently heard the reservations of the private sector including commercial importers and announced temporary suspension of the revamped sales tax zero-rating regime for five export oriented sectors-textile, leather, carpets, surgical and sports goods. As a result of suspension of the SRO.1012(I)/2011, the previous SRO.283(I)/2011 has been restored for time being which has abolished 5 percent sales tax on commercial importers.
It has been further decided in the meeting that the private sector would obtain viewpoint of commercial importers and other stakeholders on the SRO.1012(I)/2011 and an amended SRO would be issued. In the meantime, the FBR would temporarily restore SRO.283(I)/2011 till consensus has been developed by all stakeholders under SRO.1012(I)/2011, sources added.
During the meeting at the FBR House, the commercial importers have informed the tax authorities that the SRO.1012(I)/2011 has imposed 5 percent sales tax on commercial importers, whereas customs department has misinterpreted the said SRO and levied sales tax on value addition and enhanced rate of 5 percent income tax. Resultantly, hundreds of consignments of commercial importers have been blocked in Karachi creating confusion among the business community and affecting the entire supply chain.
To address the genuine grievances of the commercial importers, the applicability of the SRO.1012(I)/2011 has been temporarily suspended. On the conclusion of the meeting a participant told this scribe that after a successful round of negotiations between federal government and business community from Karachi, the FBR has stopped the implementation on revamped sales tax regime with unified reduced rate of 5% for the export oriented sectors, notified through SRO 1012(I)2011.
It has been mutually agreed to restore old sales tax regime of five export-oriented sectors including textile, leather, carpets, sports goods and surgical instruments with two rates of 4% and 6%. Siraj Qasim Teli informed the meeting that SRO1012(I)2011 would remain suspended till the negotiations between business community and FBR are concluded with mutually agreed principles. Meanwhile, five exports oriented sectors would be handled under SRO283(I)/2011 issued on April 1, 2011.