ISLAMABAD: The federal government is to declare existing zero rated companies as export oriented sectors with same products included in the SRO-1125, well informed sources in Commerce Ministry told Business Recorder.
Sharing details, sources said, FBR declared five sectors namely textile including jute, leather, carpet, surgical and sports goods as zero rated sectors under SRO 1125, on which the sales tax was charged at zero-rate. Further supply of electricity and gas to registered manufactures or exporters of five zero rated sectors were charged sales tax at the rate of zero percentage in the manner specified by the FBR.
The sources said that FBR for the purpose of registering to provide zero rating on supply of electricity and gas to manufacturers and exporters of five sectors, issued Sales Tax General Order 117 of 2015.
The government has provided concessionary rate of Cents 7.5/ kWh, RLNG at $ 6.5/ MMBTU and gas at Rs 786/ MMBTU. The facility was provided to registered manufacturers and exporters of the five zero rated sectors with the FBR.
The government in federal budget 2019-20 rescinded SRO-1125 under which the zero rating has been withdrawn for five sectors namely textiles, leather, carpet, surgical and sports goods.
The erstwhile five zero rated sectors i.e. textile including jute, leather, carpet, surgical and sports goods were given the nomenclature of export oriented sectors by Ministry of Commerce after approval of ECC of the Cabinet on December 13, 2019.
The concessionary regime of electricity and gas continued to erstwhile five zero rated sectors, now called export oriented sectors, however, the issue of registering new units under the export oriented sectors was raised i.e. erstwhile zero rated sectors so that they can also avail the benefit of the concessionary regime. Further, the FBR extended the zero rating certificate of existing consumers initially till March 31, 2020 and then to June 30, 2020. Therefore, the companies registering under zero rated by FBR are being provided concessionary electricity, gas and RLNG by the Power and Petroleum Division till June 30, 2020.
A meeting on this issue was held on May 13, 2020 under the chairmanship of Advisor to the Prime Minister on Commerce and Investment, and was attended by representatives of Petroleum Division, Federal Board of Revenue, Energy Ministry and Commerce Ministry. It was agreed that a summary may be moved for approval of ECC of the Cabinet.
Previously, the FBR was issuing the General Order for grant of zero rating to erstwhile five zero rated sectors. The best option is to direct the FBR to continue registering, the new manufacturers and exporters, however, instead of registering under SRO 125, FBR may register under export oriented industrial sectors vide OM F. No.1(18)/2019-SO(M&I) of December 13, 2019, issued by the Ministry of Commerce.
The sources maintained that Ministry of Commerce by issuing the O.M, has only provided a new nomenclature to erstwhile zero rated sectors as export industrial sectors.
The Commerce Ministry, in its summary, has requested the ECC to approve the following ;(i) previous list of companies declared zero rated by FBR may be adopted in export oriented sectors;(ii) same products which have been in SRO -1125 would continue for export oriented sectors ;(iii) FBR may register new applicant units, in accordance with past precedents of STGO-117, under Commerce Division's O.M. No. 1(18)/2019 of December 13, 2019 in manner specified by the FBR and ;(iv) FBR, Petroleum Division and Power Division to formulate regular/ routine/ random rechecking / monitoring/ withdrawal strategy for the previous and newly registered companies along-with procedure to penalize in case of misrepresentation and misuse.
Copyright Business Recorder, 2020
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