The government in 2011-12 budget forgot to reduce one percent sales tax on about 70 items/raw materials attracting higher rate of sales tax up to 22 percent, applicable through notification 644(I)/2007. A tax expert told Business Recorder here on Friday that the government had offered significant relief to the existing taxpayers' by reducing sales tax from 17 to 16 percent in budget (2011-12).
The removal of special excise duty was also a major breakthrough for them in particular. The accumulative relief on these accounts comes to around 18%, which eventually reduced the cost of production and offset the inflationary pressure. However, interestingly, the government had forgotten to give effect of same one percent cut of sales tax rates on items/raw materials which attract higher rate of sales tax. There was a need to reduce the sales tax rate proportionately on the items of 644(I)/2007 following reduction in sales tax rate from 17 to 16 percent. However, the anomaly has not been removed and still 22 percent sales tax is applicable on 70 items notified under 644(I)/2007. Despite passage of nearly 10 months since last budget, this major anomaly in the sales tax law still exists.
While standard rate of sales tax has been reduced from 17 to 16 percent in last budget, government had forgotten to extend same reduction to higher rate of sales tax applicable through notification 644(I)/2007 on certain raw material, he added. Tax experts suggested that now a single standard rate of 16 percent should be applicable on all items mentioned in 644(I)/2007. Hence the items/raw material mentioned be also given the same treatment as far as sales tax is concerned.