The Federal Board of Revenue has no intention to raise standard rate of general sales tax (GST) from 16 to 17 percent under the additional revenue generations measures to be taken in January 2010. Sources told Business Recorder here on Thursday the tax policy to announce new taxation measures mainly focuses on broader measures instead of industry specific measures such as imposition of regulatory duty (RD) on certain items.
For example, there is a possibility of raise in the special excise duty (SED), but there is no proposal to increase the rate of sales tax from 16 to 17 percent. The FBR may generate an additional amount of over and above Rs 26-27 billion following raise in GST rate from 16 to 17 percent. However, the government did not want to burden the business community with the additional increase in sales tax rate.
Sources said that the applicable rate of sales tax in different countries has gone upto 20 percent whereas in Pakistan the standard rate of sales tax is 16 percent. During the budget preparation exercise of 2009-10, the FBR had proposed to increase standard rate of sales tax from 16 percent to 17 percent across the board. However, the proposal was dropped at the level of Ministry of Finance.
It is worth mentioning that the government had increased sales tax rate from 15 to 16 percent in budget (2008-09). As sales tax on provincial services is charged under the Sales Tax Act, 1990, rate of tax on provincial services was also brought in line with the provision of Sales Tax Act, 1990. The sales tax on Provincial services was also increased from 15 percent to 16 percent from 2008-09.
When contacted, tax experts said that the standard rate of VAT in the UK is 15 percent with effect from December 1, 2008 until 31 December 2009. The rate will revert to 17.5 percent with effect from January 1, 2010. The standard rate of VAT in the Republic of Ireland is 21.5 percent.
The standard rate of VAT in Belgium is 21 percent; Bulgaria 20 percent; Denmark 25 percent; Germany 19 percent; France 19.6 percent; Italy 20 percent; Netherlands 19 percent; Austria 20 percent; Poland 22 percent; Portugal 20 percent; Romania 19 percent; Finland 22 percent and standard rate of VAT in Sweden is 25 percent.
As far as India is concerned, VAT was introduced in India from April 1, 2005, at a rate of 12.5 percent. Various states like Andhra Pradesh, Maharashtra, Madhya Pradesh, Kerala, Delhi and Haryana have introduced VAT on certain goods and services with different tax slabs specified in schedules in their respective statutes. Even 12.5 percent VAT is a low rate, there is also "central sales tax" and "service tax" also applicable on various goods and services respectively, analyst added.