The government would apply a standard VAT rate of 15 percent on the entire retail sector, abolishing multiple sales tax rates/slabs under the new value-added tax (VAT) regime from July 1, 2010. Sources told Business Recorder here on Saturday that at present different fixed sales tax rates are applicable on retailers having turnover of Rs 5-10 million and above.
However, the Federal Board of Revenue (FBR) would abolish tax slabs and one standard rate of VAT will applicable from next fiscal year. According to sources, the FBR will try to bring the entire retail chain into the tax net taking into account the proposed registration threshold of Rs 7.5 million. The VAT system would be destroyed in case of missing link in supply chain of retailers.
Currently, the government has issued a notification wherein special procedure has been devised for payment of sales tax by retailers taxing the items out in the ambit of the Third Schedule of the Sales Tax Act. This special procedure is against the spirit of VAT mode, which would be deleted, or suitably amended, to implement the VAT at the retail stage.
The Federal Government issued Sales Tax Special Rules, 2007 vide Notification No SRO 480(1)/2007 containing XII (12) chapters pertaining to retailers, electric power, natural gas, TCP, services, sugar supply to TCP, advertisements, customs gents and ship-handlers, stevedores, oil marketing companies, vehicle dealers, ginned cotton, commercial exporters, steel melters, re-rollers and ship breakers etc.
The special procedures would be abolished under the VAT regime for applicability on uniform rate from next fiscal. Most of these sectors are operating under special procedures, which need to be abolished. Sources said that if the VAT was timely approved by the Parliament, the retailers would be subject to a single rate for implementation from next fiscal year.