ISLAMABAD: The Federal Board of Revenue (FBR) is waiting for the Finance Ministry’s nod to send the draft of the presidential Ordinance to the Law Division for vetting to withdraw sales tax exemptions of Rs330 billion.

Sources told Business Recorder here on Friday that the draft of the Tax Laws (4th Amendment) Ordinance, 2021 is final at the level of the FBR.

So far, the Ministry of Finance has not given go ahead to the FBR for starting process of vetting of the proposed ordinance. As soon as the Finance Ministry will issue instructions to the FBR, the FBR will share the ordinance with the Law Division for vetting purposes.

The FBR will send the draft of the presidential ordinance to the Law Division for vetting after receiving directions of the Ministry of Finance, they said.

The sales tax exemptions, sales tax zero-rating and all kinds of reduced sales tax rates may be subjected to standard rate of 17 percent sales tax.

As a result of withdrawal of sales tax exemptions of Rs330 billion, the FBR’s revenue collection target is expected to be increased by Rs330 billion for the current fiscal year (2021-22).

Rs330bn sales tax exemptions: Presidential Ordinance on the cards

Presently, the FBR is chasing a revenue collection target of Rs5,829 billion for year 2021-22.

Through the Ordinance, the Sixth Schedule (Exemption Schedule) of the Sales Tax Act, 1990 would be completely revamped.

Except essential food and health items, the government will withdraw sales tax exemptions from the Sixth Schedule.

Sources said that the government may impose 17 percent sales tax on cellular mobile phones in CKD/CBU form under the Ninth Schedule of the Sales Tax Act, 1990.

The government will also withdraw all kinds of sales tax zero-rating except exports.

The ordinance would have six major components: (i) No zero-rating; (ii) 17 percent sales tax on mobile phones: (iii); withdrawal of major sales tax exemptions; (iv): continuation of exemptions or zero-ratings on essential food items and health items; (v) imposition of standard rate of sales tax on reduced rates items, and (vi) withdrawal of sales tax exemption subjected to conditions or conditional exemptions.

Copyright Business Recorder, 2021