The Federal Board of Revenue will suffer revenue loss during transition from General Sales Tax to Value Added Tax after reduction in higher/multiple tax rates from July 1, 2010. Sources told Business Recorder here on Wednesday that the FBR has invited an international VAT expert to work out the actual revenue implications after introduction of the VAT.
In this regard, a series of important meetings on implementation of the VAT would be convened from April 8-11, 2010. The FBR has requested S Ehtishamuddin Ahmed, a renowned VAT expert to participate in the meetings relating to VAT implementation and taxation matters in the federal capital. The meetings would be attended by VAT implementation team headed by Member Sales Tax Abrar Ahmed Khan and other local and international VAT experts.
The FBR has started working out the estimates of the revenue implications after introduction of the VAT. It included loss of revenue in transition from the GST to the VAT. Secondly, revenue impact with the withdrawal of exemptions pertaining to goods and domestic zero-rated sectors. Thirdly, revenue earned from broad-basing of VAT on services. Fourthly, impact of changes in the rate structure of VAT and inflationary impact of VAT in different tax rate scenarios.
Sources said that the sales tax would be replaced with lower rates of the VAT. For example, higher rate of sales tax on telecom services would be reduced to 15 percent standard rate of VAT. Similarly, higher rates of sales tax applicable in other sectors would also be reduced to 15 percent.
The VAT would replace the existing regimes of sales tax and excise on services with proper in-built facility for smooth transition. Federal excise duty would be abolished on all services. There would be no fixed tax, reduced tax, enhanced tax, retail price-based tax or special tax scheme under VAT so that businesses are indoctrinated towards uniform tax compliance. No zero-rating has been allowed on any commercial form of domestic supply of goods.