ISLAMABAD: The Federal Board of Revenue has decided to introduce a single rate of 5 percent on the local supplies made to un-registered persons of five export oriented sectors - textile, leather, carpets, surgical and sports industry from August 1, 2011.
Sources told Business Recorder here on Thursday that the FBR has finalised the draft notification in active consultation with the stakeholders particularly representatives of zero-rated sectors. The FBR will shortly issue the notification after vetting from Law and Justice Division. The FBR will introduce a totally revamped sales tax regime for five leading export oriented industries through a new notification to be issued in coming few days.
According to sources, the specified goods (useable as industrial inputs) covered under the revised notification if imported by the registered manufacturers (including manufacturer-cum-exporters) of textile, carpets, leather, sports and surgical goods sectors, shall be exempt from sales tax. However, the goods imported by the registered commercial importers will be charged to sales tax @ 5 percent of the value.
On local manufacturing, purchase or supply side, the new notification shall, in case of textile sector apply from ginning stage onwards (for synthetic sector from production of PTA and MEG) and in case of other sectors, from the first organised manufacturing stage onwards.
Sources said that the supplies of these goods to registered persons upto wholesale stage shall be zero-rated. The supplies of these goods to retailers both registered and unregistered shall be charged to sales tax @5 percent of the value. Where a registered person has acquired goods at reduced rate of sales tax of 5 percent, he shall be entitled to input tax adjustment or as the case may be refund against the subsequent supplies made by him either at reduced rate or as the case may be, at zero rate.
Sources said that a registered person who has consumed any other inputs not covered in new notification acquired on payment of sales tax, shall be entitled to input tax adjustment or as the case may be, refund in respect of the supplies made by him either at reduced rate or at zero rate.
The registered persons who are solely or otherwise engaged in the retail business of these goods or products shall pay sales tax at the reduced rate of 5 percent on their retail sales and shall be entitled to input tax adjustment or as the case may be, refund against such sales and they shall not be required to pay any other upfront sales tax on their such retail transactions. Where in the case of registered manufacturer-cum-retailers, amount of claimable refund exceeds the amount of tax payable by a registered person availing new notification, he may minus the tax liability from his refundable amount and claim refund of the balance amount, if any.
Sources said that the registered industrial units who process goods owned by unregistered persons shall charge sales tax at reduced rate of 5% on the processing charges received by them provided that no tax shall be charged from the registered principals.The registered manufacturers shall be entitled to the adjustment of input tax paid on machinery parts or spares and lubricants acquired by them for their own use. All finished products of the said five sectors shall, if sold to the end consumer, be charged to sales tax at 5 percent of the value:
Sources said that the benefit of the new notification will be available if the goods covered in the notification are used in the specified sectors for the purpose of manufacturing or trading. Provided that in case of registered manufacturers engaged in the manufacture of mix range of products, who are acquiring bulk inputs for use in the manufacture or production of goods for the aforesaid five sectors as well as for other non-concessionaire sectors, shall be entitled to import or purchase their bulk supplies of inputs without payment of tax or as the case may be at zero rate provided that they pay sales tax due on the supplies of their outputs to non-concessionaire sectors and maintain proper records for production and sale of non-concessional and non-concessional categories of outputs.
Sources said that the supply of electricity and gas to the registered manufacturers of the above mentioned five sectors shall be zero rated in such manner and to such extent as may be specified by the FBR. Where any difficulty arises in giving effect to new notification, the FBR may issue such instructions or directions as it considers necessary or expedient for the purpose of removing the difficulty.
Sources added that the FBR will notify the following goods under the Pakistan Customs Tariff (PCT) heading numbers including the goods or class of goods mentioned in the conditions stated in the new notification, to be the goods on which sales tax shall, subject to the said conditions, be exempt on the supply and import thereof, or charged at zero-rate or as the case may be, at reduced rate of sales tax of five percent to the extent and in the manner as specified in the conditions: The description of goods included leather and articles thereof including artificial leather footwear; textile and articles thereof excluding monofilament, sun shading, nylon fishing net, other fishing net, rope of poly ethylene and rope of nylon, tyre cord fabric; carpets; sports goods; maize (corn) starch; mucilages and thickeners, whether or not modified, derived from locust beans, locust bean seeds or guar seeds; rattans; cotton linter; emery powder/ grains; magnesium oxide; coning oil; spin finish oil; silicon dioxide; caustic soda flakes in solid form and liquid; titanium dioxide; antimony oxide; sodium bromate; sodium sulphide and sodium hydrogen sulphide; sodium dithionite; sodium sulphite and sodium hydrosulphide; disodium sulphate; phosphonates (hypophosphite) and phosphonates (phosphates); sodium dichromate; hydrogen per oxide; p-xylene; trichloroethylene; ethylene glycol (MEG); 4-chloro 3-methyl phenol and chloro hydro quinone; di-ethylene glycol; ethyl glycol; tri-ethylene glycol; glutar aldehyde; formic acid; sodium formate; acetic acid; sodium acetate; cobalt acetate; acrylic acid and its salts; esters of methacrylic acid; oxalic acid; adipic acid, its salts and esters; maleic acid; pure terephthalic acid (PTA); tartaric acid; gluconic acid and its salts; glycolic acid and their esters; other phosphoric esters and their salts; dyes intermediates; DMF ) dimethyl formamide); acrylonitrile; other organic derivatives of hydrazine or of hydroxylamine; tanning extracts of vegetable origin; tannins and their salts, ethers, esters and other derivatives; substances, tanning perpetrations, whether or not containing; natural tanning substances; enzymatic preparations for pre-tanning; disperse dyes and preparations based thereon; acid dyes & preparation based thereon; basic dyes and preparations based thereon; direct dyes and perpetrations based thereon; indigo Blue; vat dyes and preparations bases thereon; reactive dyes and perpetrations based thereon; pigments and perpetrations based thereon; dyes, sulphur; dyes, synthetic; synthetic organic products of a kind used as fluorescent brightening agents; other synthetic organic colouring matter; pigments and preparations based on titanium dioxide; other colouring matter and other preparations; granules, flakes, powder of glass (others); prepared water pigments of a kind used for finishing leather; anionic surface active agents; anionic surface active agents; non-ionic surface active agents; surface active preparations and cleaning preparations excluding detergents; preparation for the treatment of textile material, leather, fur skins or other material; spin finish oil; artificial waxes and prepared waxes; other glues (printing gum); shoe adhesives if imported directly or purchased from the local registered manufacturers of shoe adhesives by the manufacturers of leather or sports goods for their own use; hot melt adhesive if imparted directly on purchased from the local registered manufacturers of hot melt adhesives by the manufacturers of leather or sports goods for their own use; enzymes; photographic film, with silver halide emulsion (for textile use); Sensitising emulsions (for textile use); gum rosin; fungicides for leather industry; preparation of a kind used in textile or like industry; preparation of a kind used in leather or like industries; compound plasticizers for rubber or plastics; antimony triacetate; palladium catalyst; electrolyte salt; electro polishing chemicals; thermoplastic adhesive for manufacture of fusible interlining; PMC if imported by registered manufacturers of mono- filament yarn for their own use; polymers of vinyl acetate (in aqueous dispersion); vinyl acetate copolymers in aqueous dispersion; polymers of vinyl alcohol; other vinyl polymers; other acrylic polymers; acrylic polymers in primary forms; polyethylene terephthalate-yarn grade, and its waste; nylon chips (PA6); polyurethanes; silicones in primary form; cellulose nitrates nonplasticised; other cellulose nitrates; carboxymethyl cellulose and its salts; alginic acids, its salts and esters; nylon tubes; artificial leather; cellular plastic foam for the manufacture of sports and leather goods; synthetic leather grip; sequins; natural rubber latex; technical specialised natural rubber; rubber latex; synthetic rubber SBR 1502 latex; butadiene rubber; thermo-plastic rubber (TPR); vulcanised rubber thread and cord; leather shearing-finish leather with wool; articles of apparel and clothing accessories of fur skin; artificial fur and articles thereof; English willow cleft (wood); cork granules; cork sheet; wood-pulp (dissolving grade) if imported by manufacturers of viscose staple fibre for their own use; satin finishing wheels; carbon fiber; glass fiber sleeves; shoe tacks; forging of surgical and dental instruments; nickel not alloyed; nickel rotary printing screens; hooks for footwear; eyes and eyelets for footwear; tubular or bifurcated rivets; strings; bladders and covers of inflatable balls; press-fasteners, snap fasteners and press studs; buttons of plastics not covered with textile material; buttons of base metal not covered with textile material; studs; buttons; slide fasteners fitted with chain scoops of base metal, sources added.