The Federal Board of Revenue (FBR) is planning to continue with one percent turnover tax regime in budget (2012-2013) to avoid a revenue loss of around Rs 20 billion during the next fiscal year. Sources told Business Recorder here on Tuesday that keeping in view the huge revenue loss, it was not feasible to reduce turnover tax to its previous rate of 0.5 percent.
They said that any move to abolish it would cause a massive revenue loss to the national exchequer. Prior to the budget 2010-11, the 0.5 percent tax on declared turnover was chargeable in cases of companies declaring losses. With the argument to rationalise the levy vis-à-vis taxes payable in corporate cases returning taxable income, the rate of minimum tax for cases showing losses was enhanced to one percent. As a result, the business and trade did not accept this enhancement in the turnover tax rate under Section 113 of the Income Tax Ordinance 2001.
The FBR had received a number of presentations from different sectors for reduction in the turnover tax rate since 2010-11. Since enhancement in the rate of turnover tax, the FBR has reduced tax under Section 113 of the Income Tax Ordinance 2001 on Pakistan International Airlines Corporation (PIAC), petroleum agents and distributors and poultry industry, including poultry breeding, broiler production, eggs production and poultry feed production.
During 2010-11, turnover tax was reduced from one percent to 0.5 percent for refineries and oil marketing companies (OMCs). The FBR had also allowed 80 percent rebate on payment of turnover tax by pharmaceutical distributors, distributors of fast moving consumer goods and distributors of fertilisers. The FBR had already reduced turnover tax from one to 0.5 percent for Sui Northern Gas Pipelines (SNGPL) and the Sui Southern Gas Company Limited (SSGC).
The rate of minimum tax was enhanced from 0.5 percent to 1 percent and minimum tax shall be applicable where a loss is suffered under the conditions as described in sub-section (1) of Section 113. The same applies in the case of an association of persons having turnover of Rs 50 million or above in the tax year 2007 or in any subsequent tax year. An individual having a turnover of Rs 50 million or above in the tax year 2009 or in any subsequent tax year shall also be liable to 1 percent tax on the turnover.