The government is likely to abolish one percent special surcharge on the import of raw materials and inputs on which sales tax was charged at the rate of zero percent at import stage through amendment in the Finance Bill 2007-2008.
Through another major amendment proposed in the Finance Bill, the Central Board of Revenue (CBR) would remove an ambiguity in the income tax law to extend exemption to the group companies on inter corporate dividends. The CBR will also issue an income tax circular to clarify all issues pertaining to the new baking schedule introduced in the Income Tax Ordinance 2001.
Sources told Business Recorder on Saturday that the CBR Chairman M. Abdullah Yusuf and his team of tax managers have finalised the amendments in the Finance Bill to be forwarded to the National Assembly on Monday (June 19).
In this regard, complete review of Finance Bill was conducted keeping in view of 19 final amendments submitted by the Senate Standing Committee on Finance and Revenue. Sources said that the concept of levying one percent special surcharge was to tax the luxury items and this additional customs duty seemed to be unjustified in case of raw materials subjected to sales tax zero-rating regime at the import stage. The non-luxury items should not be liable to one percent special surcharge.
The raw materials were zero-rated to encourage investment in leading sectors, whereas imposition of surcharge would create a legal anomaly in the taxation system. Therefore, the government may withdraw one percent special surcharge on the import of raw materials, which were subjected to sales tax zero-rating at the import stage. This additional customs duty would be restricted to only on the import of luxury items.
The CBR would generate additional revenue of Rs 13.24 billion from levy of one per cent surcharge on imports. In case import of raw materials was exempted from the levy, this would have minimum revenue impact on the overall collection under this head.
According to sources, the board may also rectify a mistake in the income tax law pertaining to group relief. An amendment is expected in clause 103 of the part one of the Second Schedule of the Income Tax Ordinance 2001.
Sources said that the CBR would also propose amendment in the Finance Bill to clarify issues pertaining to customs valuation and appeal related matters. Other amendments related to streamline the existing procedures, remove ambiguities and ensure facilitation to the industrial sectors.