ISLAMABAD: The Federal Board of Revenue (FBR) has noted with concern low sales tax collection by some commodities as petroleum products, electricity, sugar, cotton yarn, cement, cigarettes, food products, and beverage remained major contributors.

The FBR’s report (2020-21) on sales tax collection revealed that the major chunk of collection of sales tax domestic, contributing around 77 percent of total collection under the head are petroleum products, electrical energy, sugar, cotton yarn, cement, cigarettes, food products, and aerated water/beverage, etc.

The narrow base of sales tax collection due to greater reliance on a few items needs policy intervention.

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There is a need to look into and review the existing base and to ascertain as to why there is a lower contribution by other commodities.

Detail of 10 major items revealed that the POL products - the top revenue generating source with 34.9 percent share has recorded 30.1 percent growth during FY 2020-21.

Tax from electrical energy grew by 38.6 percent, sugar by 57.8 percent, cotton yarn by 71.2, and cigarette by 37.2 percent.

All other major items performed well during the period under review.

In 2020-21, the higher international prices of POL products attributed to more than 30.1 percent increase in sales tax domestic collection. The increase in energy tariff and growing demand of electricity helped in attaining more than 38 percent growth in collection from this head.

The effective monitoring by the FBR and the concerned filed formations resulted in increased sales tax collection from the sugar sector.

The increase in cotton prices increased sales tax collection from cotton yarn.

The growth in construction activities increased the demand for cement and so the sales tax collection.

The inflation effect increased sales tax collection from cigarettes and food products.

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Post-Covid demand and launch of new vehicles/SUVs increased sales tax collection from cars.

The net collection of Sales Tax Domestic (STD) was Rs863.2 billion in 2020-21 against Rs720.5 billion in 2019-20 and net collection grew by 19.8 percent.

In absolute terms, Rs142.6 billion higher amount of revenue has been collected in FY 2020-21 as compared to 2019-20, the FBR added.

Copyright Business Recorder, 2021