The Senate Standing Committee on Finance has recommended the National Assembly to continue sales tax zero-rating regime for five export-oriented sectors in the Finance Bill 2019. The committee presided over by Senator Farooq H Naek resumed discussion on the Finance Bill 2019 on Wednesday and representatives of various sectors of the economy turned up in the meeting to express their concerns.
The committee was in unanimity that five zero-rated sectors are backbone of the exports and preferential treatment must continue to them to increase exports and, thereby, deal with the problem of trade deficit. However, Federal Board of Revenue's (FBR) contention was that it is prepared and willing to sincerely deal with their primary problem of refund even at upfront level but their local sales must be brought into standard rate of sales tax.
Representative of zero-rated export sectors, Zubair Motiwala informed the committee that the government would trigger inward smuggling of cloth from Afghanistan by implementing 17 percent sales tax even at local stage. However, chairman FBR Shabbar Zaidi maintained that the government would soon take up the issue of smuggling with Afghan authorities and if it is unable to plug it, the government would be open to review its decision with regard to sales tax on local sale.
Shabbar Zaidi stated that basic issue of exporters is their refund payment and the government is ready to sit with them to devise a mechanism for payment of refunds at export stage. About pending refunds pointed out by the exporters during the meeting, the FBR chairman said, "Please get Rs 150 billion from me and get refund bonds."
He added that the government has also made sales tax registration automated to facilitate the businesses.
The ship breaking industry desired that special procedure should continue for steel industry and ship breaking industry should be charged Federal Excise Duty (FED) at 70 percent weight of the ship instead of 100 percent weight that is being proposed in the Finance Bill 2019.
The committee recommended the National Assembly that 85 percent weight of the ship - both for input and output - should be taken for FED. Fertilizer dealers also expressed their reservations over increase in turnover tax from 0.5 percent to 0.7 percent in the Finance Bill 2019.
However, the FBR representatives stated that it would be difficult to achieve the challenging revenue collection target for the next fiscal year as some revenue is also expected from efforts to document economy.
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