The Federal Board of Revenue (FBR) is expected to incorporate a budget proposal floated by the Securities and Exchange Commission of Pakistan (SECP) to reduce withholding tax on import of gold @ of 0.1 percent of the import value. It is learnt that the FBR is seriously reviewing the budget proposals of the SECP for incorporation in the Finance bill, 2011.
According to the SECP proposal, tax on import of gold was imposed in 2006-07 @ 1 percent of import value. Since imposition of this tax, the volume of gold imported through proper channels has decreased drastically and the amount of tax collected under this head is also insignificant.
The SECP has proposed to tax gold at the import stage @ of 0.1 percent of the import value, provided that the gold is imported by a corporate member for trading at the commodity exchange. The proposed reduction in tax rate would make legally imported gold viable to compete with illegally imported gold. As the Commodity Exchange provides a regulated market place to buy and sell gold at transparent market prices, it would discourage manipulation by gold traders in the open market. It would promote documentation of trading of gold, in comparison to the current huge parallel economy in undocumented trading and resultantly, would increase Government revenues from documented import of gold.
The existing provision of clause (13G) (iv) of Part II of Second Schedule to the ITO, 2001 says that the tax under section 148 on the following item shall be collected @ 1 percent of their import value as increased by customs-duty, sales tax and federal excise duty, if any levied thereon: Gold; mobile telephone sets and silver.
The proposed amendment under clause (13G) (iv) of Part II of Second Schedule to the ITO, 2001 says tax under section 148 on the following item shall be collected @ 1 percent of their import value as increased by customs-duty, sales tax and federal excise duty, if any levied thereon: gold; mobile telephone sets and silver. Provided that if gold is imported by any corporate member of any commodity/mercantile exchange of Pakistan (the Commodity/Mercantile Exchange) for the purpose of trading at the Commodity /Mercantile Exchange then tax under section 148 on the import of gold shall be collected at the rate of 0.1 percent of the import value, SECP added.