The Federal Board of Revenue (FBR) has proposed withdrawal of exemption of special excise duty (SED) on import of tin plate in the coming budget for 2011-12.
Sources told Business Recorder here on Sunday that the FBR has also decided to continue with the concept of cottage industry to facilitate those manufacturers whose annual turnover from taxable supplies made in any tax period during the last 12 months ending any tax period does not exceed Rs 5 million or whose annual utility (electricity, gas and telephone) bills during the last 12 months ending any tax period do not exceed Rs 700,000 (seven hundred thousand rupees).
According to FBR proposal, at present the tin plate has been exempted from special excise duty. However, its raw material ie tin mill black plate/cold rolled coils is subject to special excise duty which is not adjustable by the manufacturers of tin plates. The commercial importers have the facility to import finished tin plate without payment of SED. In order to ensure equitable tax treatment, it is proposed to withdraw exemption of special excise duty on tin plate which will benefit manufacturers to adjust SED paid on raw material.
Through another budget proposal, the government is planning to retain the concept of cottage industry and exemption threshold for sales tax purposes in the budget for 2011-12. In Pakistan, efforts to introduce true value-added tax (VAT) or fully reformed general sales tax (GST) could not succeed so far. The non-compliance by retail sector has remained a major bottleneck in the proliferation of sales tax up to the end of supply chain. Historically, several schemes of upfront reduced taxation for retailers were introduced. These, too, went in vain. The traditional delinquent sectors like steel rollers and melters and CNG stations have been dealt with by FBR through source taxation on electricity and gas.
The unregistered retailers, restaurants and industrial units can also be effectively covered if the instrument applied in case of steel products and CNG is replicated. It is, therefore, proposed to introduce sales tax collection @ 25 percent (which also includes 17 percent tax already being charged) on the electricity and gas bills issued by utility companies to unregistered retailers, restaurants and industrial units. Exemption threshold or the concept of cottage industry will not be shelved, the FBR proposal added.