New criteria added to ST section: Cottage industry turnover threshold reduced to Rs 3 million

The government has maintained that annual turnover threshold of cottage industry has been reduced from Rs 10 million to Rs 3 million but three new criteria have been added to the sales tax section dealing with the industry.

This has been stated by the tax authorities in a presentation made to the Senate Standing Committee on Finance. They said that in the sales tax, the definition of cottage industry has been modified to make it more robust and infallible. The annual turnover threshold has been reduced from Rs 10 million to Rs 3 million and three new criteria have been added to the said section. To qualify as cottage Industry, all the four conditions will have to be fulfilled.

Exemption to cottage industry has been modified as; (i) it does not have an industrial gas or electricity connection; (ii) it is located in a residential area; (iii) it does not have a total labor force of more than ten workers; (iv) and annual turnover from all supplies does not exceed three million rupees. Additionally supplies made to cottage industry are exempted from sales tax.

Secretary Finance Naveed Kamran Baloch has recently informed the Senate Standing Committee on Finance that the government has been working for the revival and promotion of industrial sector including small and medium enterprises and cottage industry. He added that Prime Minister Imran Khan is himself taking special interest in the revival of SME and cottage industry and is regularly taking update from his economic team during weekly meetings.

The Prime Minister firmly believes that potential of SMEs and cottage industry should be fully exploited and a policy is currently being prepared by the Ministry of Industries envisaging incentives for the revival of SMEs and cottage industry to promote growth and employment. The meeting was informed that in this regard, various incentives in customs import duties have been provided to the manufacturers and SMEs and the customs duty on 1,639 Industrial raw materials has been reduced to 0 percent.

Additionally, other raw materials and intermediary goods required by the manufacturing sector including SMEs are subject to the lowest tariff slabs which are 3 percent and 11 percent respectively. Special duty exemptions for the local industry have also been provided through the Customs Act, 1969.

Major sectors/SMEs which enjoy benefit under the said schedule include agriculture, dairy, poultry, bicycle chain manufacturing, tanning, manufacturing of fans, and processing of marble and granite, etc. These are special incentives to export-oriented units and they are allowed duty-free import of plant, machinery, equipment and apparatus including capital goods, raw materials, accessories, sub-components, components, assemblies and sub-assemblies.