Govt proposes 17pc tax slab reduction on brick kilns; food supplied by restaurants, bakeries

ISLAMABAD: The federal government on presenting the budget 2019-20 Tuesday proposed to reduce tax slab imposed on brick kilns and food supplied by restaurants and bakeries in order to relieve the inflation stressed masses.

The state minister for Revenue Muhammad Hammad Azhar in his budget speech said that at present, brick kilns were being taxed at standard rate of 17 per cent.

“It is proposed to decrease the rate of sales tax from 17 percent to a fixed rate based on location. The industry pertains to rural area, where it is difficult to fulfill the requirement of documentation. Therefore, this measure shall ensure improved compliance at a lower cost,” he added.

However, the state minister for revenue in an deliberate move to ensure least impact of strict economic decisions, taken by the government, on the public proposed reduced rate of sales tax on food supplied by restaurants and bakeries.

He noted, “Food related inputs such as meat, vegetables, flour etc are difficult to document and resultantly require increased cost of enforcement.”

Therefore, in order to encourage compliance, he said at a minimal cost of enforcement for the tax authorities, it was proposed to reduce the sales tax rate from 17 per cent to 7.5 per cent against which input tax adjustment would not be allowed.

While taking the account of the current non-uniform sales tax regime on various forms of milk powder, the state minister for revenue proposed reduction of rate of sales tax on concentrated milk (Powder).

“Similar products are subject to varied tax rates. Therefore in order to remove this anomaly, it is proposed to tax both milk and cream, concentrated, and unsweetened / unflavoured at 10 per cent instead of current 17 per cent,” he announced.

The federal government had also suggested reducing extra tax in addition to sales tax on many items which would help to exploit stagnant revenue potential and reform extra tax regime.

Azhar in his speech went on to mention that currently extra tax of 2 per cent in addition to standard sales tax, was payable on many items such as electric and gas appliances, foam, confectionary, arms and ammunition, lubricants, batteries, auto parts, tyres / tubes etc.

“In order to realise full revenue potential, it is proposed that these items (auto parts and arms & ammunition) be moved to Third Schedule (retail price taxation) of the Sales Tax Act, 1990,” he said.

In respect of two remaining items i.e. auto parts and arms and ammunitions, it was proposed to withdraw extra tax on the same to reduce the cost of production of local industry, he added.

The government in order to encourage local production of PMC and PVC plastic products had suggested to remove bar on export of PMC and PVC to Afghanistan.

“Removal of bar on export of PMC and PVC is proposed by zero rating export of these items to Afghanistan and Central Asian Republics. This measure would encourage local manufacturing of the aforementioned materials in the country and at the same time shall also promote exports,” the state minister mentioned.

In the wake of incorporating the erstwhile federally and provincially administered tribal areas namely FATA and PATA into the national economy the expansion of exemption to tribal areas were also proposed.

After the merger of FATA and PATA exemptions were extended for five years in respect of supplies to promote economic activity. It was proposed to extend exemption to tax on import of industrial raw materials and plant and machinery also, Azhar said in his budget speech.

Additionally, exemption was also proposed for supply of electricity to all residential and commercial consumers and to industries set before 31-5-2018 excluding steel and ghee sector in these areas.

The government had also suggested withdrawal of 3 per cent value addition on import of mobile phones. “Currently commercial imports are subject to 3 per cent value addition tax which has unnecessarily increased the tax burden. Therefore, it is proposed that 3 per cent value addition tax on import of mobile phones maybe withdrawn. This measure would also ensure rationalization of tax on import of mobiles,” he mentioned.

The budget proposals made by the government also included reforming 3 per cent Value Addition Tax (VAT) on petroleum products.

“Exclusion of VAT is only available on those products imported by oil marketing companies (OMCs) where prices are regulated.

It is proposed that exclusion be provided to all Petroleum products like furnace oil, imported by the OMCs,” the state minister for revenue said.