Senate panel told: Turnover tax exemption to USC possible only thru Finance Bill

Hameed Memon, a senior Inland Revenue official and Director General (Retail), Federal Board of Revenue (FBR), has said that exemption from turnover tax to Utility Stores Corporation of Pakistan is only possible through the Finance Bill at the time of federal budget. He submitted this legal stance during the last meeting of the Senate Standing Committee on Industries and Production.

Hameed Memon apprised the committee that basic food items including various essential items are exempted from the tax as prescribed in the Sixth Schedule (Exemption Schedule) and Eighth Schedule (conditional exemption) of the Sales Tax Act 1990. There is taxation at the reduced rate on sugar and packaged dairy products. He stated that most of the items sold by the USC are already tax-exempted or reduced rate of tax is charged on them. The MD USC stated that the USC pays 1.5 percent turnover tax on all the products sold that means that tax is levied on virtually everything and even on the subsidies received by the government in the month of Ramazan is taxed in this way.

Hameed Memon stated that the FBR shall look into the turnover tax issue of USC; however, exemption from the turnover tax shall take place through bill and might only be possible at the time of budget.

In response to a question on average rate of profit of USC, the MD USC apprised the committee that profit margin is 1.7 to 2 percent on wheat and 5 percent on ghee (which is way lower than the market).

Senator Asif Kirmani opined that turnover tax levied on USC is actually on the poor people who happen to be the customers of the USC, which is totally against the concept of welfare state. He opined that committee must take every effort to provide relief to the poor.

Copyright Business Recorder, 2019