The government is planning to give tax incentive package to local TV industry by applying reduced rate of one percent customs duty on the import of LCD/LED panel under SRO.565(I)/2006 and reducing sales tax on TV from 16 to 5 percent as final discharge of liability.
Sources told Business Recorder here on Tuesday that the reduction in customs duty and sales tax for local TV industry would be linked with bringing entire transaction chain ie from the manufacturers to retailers into the tax net. This is a major reduction in sales tax from 16 to 5 percent on TV under SRO 565 as the final discharge of liability. The revenue loss on account of tax incentive package has to be worked out by the tax managers.
However, FBR has not yet principally agreed to grant any tax concession or relaxation in sales tax rate from 16 to 5 percent on TV due to revenue implications. The FBR has opposed the proposal of giving such kind of tax exemptions at this stage when the Board is taking measures to generate additional revenue in the remaining period of current fiscal year. Though recently a meeting was held at the Economic Affairs Division to consider the proposals of electronics industry, but the FBR has not confirmed the reduction of sales tax from 16 to 5 percent.
According to official documents, a second meeting with the members of the Pakistan Electronic Manufacturing Association (PEMA) was held recently, which was presided over by Minister of State for Finance Saleem Mandviwalla at Economic Affairs Division. The agenda of the meeting was reduction in custom duty on LCD/LED panel under SRO.565 and reduction in sales tax on TV under SRO.565.
Minister of State for Finance inquired about the issues pertaining to Pakistan Electronic Manufacturer Association (PEMA) and assured the PEMA members for resolving all the issues related to their industries. Mandviwalla added that the present government had always facilitated the local industries by resolving all their issues as it would increase government revenue, increase local production and create employment in the country. He said that concrete steps were being taken by the government on priority basis to counter smuggling for making local industries viable.
During the meeting, Muhammad Farooq Naseem Vice Chairman PEMA, apprised the participants about the crisis of electronic industries due to smuggling of LCD/LED TVs into the country. "This is causing huge losses to national exchequer in term of taxes. The PEMA has already given its proposal to Chairman FBR and also given a detailed presentation to the Minister and FBR delegation," he added.
It was discussed in detail that the current smuggling of TV sets (LCD and LED) had increased manifold due to higher value of the product. The meeting pointed out that the current revenue contributed by the TV industry is very small as large revenue is lost due to illegal imports. If the local industry is provided a level playing field, production could increase from 200,000 sets per annum to 700,000 sets within 12 months. The entire transaction chain ie from the manufacturer to the retailer must be brought into the tax net.
The meeting decided that the customs duty on LCD/LED panel as a component of TV in SRO 565 would be reduced to one percent. Secondly, sales tax on TV under SRO 565 to be reduced to 5 percent as the final discharge of liability. Thirdly, all PEMA member industries utilising TV production under SRO565 shall disclose their TV production details with serial numbers of each set, sales invoice to retailers/dealers with NTN numbers of each dealer and ensure complete transparency in the transactions.
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