ISLAMABAD: Chairman FBR/Secretary Revenue Division, Dr Muhammad Ashfaq Ahmed said Wednesday that the government will withdraw the remaining sales tax exemptions in the coming budget.
Briefing Senate Standing Committee on Finance on the Finance Supplementary Bill, 2021, the FBR chairman said that the zero sales tax would come from the pharmaceutical sector.
The sales tax refund of Rs195 billion would be issued to the pharmaceutical companies including Rs160 billion from withdrawal of sales tax exemption and Rs35 billion from input tax paid on packaging material and utilities.
He said that the IMF thinks that the Pakistan is not on this planet but on Mars in terms of taxation, while referring to the taxation on the pharma sector.
He said that the International Monetary Fund (IMF) has demanded to remove tax exemptions of Rs700 billion but the FBR has convinced the Fund to restrict withdrawal of exemptions to the tune of Rs343 billion at this stage.
If any exemptions are left, the remaining exemptions would be withdrawn in the coming budget.
The petroleum levy is not part of the Finance Supplementary Bill, 2021.
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The FBR chairman, while terming the tax reforms the most significant tax policy reforms, in the history of the country focusing on removal of distortions and not on imposing new taxes gave a comprehensive briefing on the background, salient features of the IMF-FBR engagement, changes in the GST regime, income tax, Federal Excise Act, changes in Customs Act, and targeted subsidy items.
The chairman FBR termed the reforms on the basis of “No tax Exemptions - only targeted subsidy.”
The tax system is mechanized to increase the revenue with the underlying principle of “Collect and Spend.”
The FBR apprised the committee that the IMF demanded 17 percent GST across-the-board and withdrawal of exemptions at Rs700 billion; conceded - Rs343 billion.
The FBR chairman informed the committee that the new reform has deviated from the rule of the thumb with the value added tax, ie, 17 percent GST across–the-board without any exemptions and defended reduced rates of the GST on agriculture tractors, fertilisers, inputs of fertiliser sector, pesticides, used clothing, footwear, and cinematographic equipment.
The FBR also defended imposition of the GST on food items e.g. wheat, wheat flour, wheat bran, rice vegetables, fruit, pulses, fresh poultry, fish and meat (consumed by the common man), milk and fat-filled milk, sugarcane and beet sugar (raw materials), education books, and stationery items etc.
The FBR officials briefed the committee on the exemptions that the government intends to give to the various sectors, which includes Rs71 billion on the goods and Rs2 billion on the common man usage products, Rs160 billion on pharmaceutical products, and Rs112 billion on machinery with GST refundable/adjustable.
The committee was apprised by the FBR of the proposed regime of the pharmaceutical sector.
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The FBR informed the committee that out of 800 manufacturers, only 453 are registered with the FBR, whereas, Rs35 billion input tax has been passed on to patients (packing, utilities etc).
The Rs530 billion is undocumented in the supply chain.
The turnover of the sector is Rs700 billion, but there were issues of input and output and documentation.
The FBR informed the committee that the sales tax will be imposed on the import of the pharmaceutical raw materials at the import stage, whereas, with zero–rating will be applicable on local sales of medicines.
The new reforms will also give expeditious payment of refunds (within one week).
The committee chairman stated that the sales tax refund to be restored within 72 hours as claimed by the FBR should be diligently monitored and anyone anywhere in the country victimised to the claimed refund can charge its claim in the senate committee for redressal.
While briefing on the revenue measures in the new tax reform policy the committee was appraised that advance tax on cellular services, advance tax on vehicle registration to discourage on—money (premium) advance tax on foreign TV serials, dramas and adverts are also imposed.
The committee was apprised that the targeted subsidy items will benefit the common man by Rs19 billion and import by Rs14 billion.
Copyright Business Recorder, 2021
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