The Federal Board of Revenue (FBR) has replaced zero rating facility on supplies against international tender with exemption in order to eliminate undue refunds in budget (2012-2013). Explaining the measure, a top Karachi-based sales tax expert, Arshad Shehzad has informed that sales tax rules 2006 having detailed procedure is introduced where zero rating is replaced with exemption in order to eliminate abuse of refund facility on this particular account.
He explained that exemption against supply is restricted to the extent of foreign grant, aid or loan component of the tender only. The foreign component of the international tender requires to be received in foreign currency and needs to be surrender to the SBP as per its regulation. Invitation for the tender requires proper publishing in newspaper, international journals or website, the successful bidder in order to avail the exemption facility requires prior approval from the board along with submission of following documents application having full particulars including NTN/STRN (where requires); certificate for compliance of PPRA rules; certificate for deposit of foreign exchange with SBP; value of tender amount of foreign currency and equivalence in Pak rupee; list of goods requires tentatively in prescribed format, which can be revised and any other document may required by the Board.
The board subject to satisfaction of the documents shall issue provisional approval for exempt supplies against tender under intimation to respective RTO or LTUs as the case may be. The supplier may operate under exemption regime till finalisation of contract. Thereafter the board may issue final approval upon submission of the final list of goods in the same prescribed format under intimation to respective RTO's and LTU's. In case of goods found not to be supplied against international tender in a manner provided in the rules the sales tax leviable would be recovered accordingly along with default surcharge and penalties, Arsahd Shehzad added.