Despite negligible sales tax collection from brick-kilns owners during 2011-2012, the Federal Board of Revenue (FBR) has no intention to abolish sales tax on bricks and building blocks of cement, including ready-mix concrete blocks in the upcoming budget (2012-2013).
Sources told Business Recorder on Thursday that the sales tax collection from brick-kilns was much below expectations during 2011-2012 because of lack of enforcement. So far, there is no policy to restore exemptions, and it seems that the government will continue with its policy of withdrawing exemptions. Keeping in view the government''s policy, the sales tax would not be abolished on brick-kilns.
The FBR had amended the Sixth Schedule of the Sales Tax Act, 1990, in the last budget to withdraw sales tax exemptions on bricks and building blocks of cement, including ready-mix concrete blocks. A tax expert said that the Board had not issued any rules or special procedure for the collection of sales tax on bricks and cement building blocks. Resultantly, field formations were unable to enforce 16 percent GST on bricks, resulting in low collection from this sector.
In the last budget, the FBR had reduced the federal excise duty on cement, but at the same time imposed 16 percent sales tax on bricks used in the construction industry. Tax expert said that the threshold for sales tax registration was Rs 5 million under the Sales Tax Act, 1990. Apparently, the units engaged in manufacturing bricks were below the threshold, they said. Moreover, the definition of cottage industry under the Sales Tax Act says, "cottage industry" means a manufacturer 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.
Their annual utility (electricity, gas and telephone) bills also do not exceed Rs 700,000 during the same period. Units, they said, engaged in manufacturing bricks might have fallen under definition of cottage industry and not liable to pay sales tax. The department had to determine the exact number of brick-kiln owners who are registered with income tax department, as there was no income tax registration threshold.
It was comparatively easier to register brick-kiln owners with the income tax department than sales tax, sources added. When sales tax was imposed on bricks, brick-kiln owners and labourers had staged massive protests across Punjab. Members of the All-Pakistan Bhatta Association had vehemently opposed the imposition of 16 percent sales tax on bricks. They said that the imposition of sales tax would raise the cost of bricks.