LAHORE: Polyester Staple Fiber (PSF) manufacturers have drawn attention of the anomaly committee of the federal government towards the anomaly in Finance Bill 2024 related to sales tax.

In a letter to the federal government, copy available with Business Recorder, they said the Finance Bill 24 has proposed omission of S.No.21 and entries relating thereto in the 5th Schedule to the Sales Tax Act through clause 5(20).

They pointed out that S.No.21 provides zero rating to local supplies of raw-materials to registered exporters authorized under the EFS.

Under the EFS scheme, they said, all local inputs procured by the authorized exporters are entitled to zero rating under S.No.21 of 5th Schedule of the Sales Tax Act. On import, similar raw-materials are exempt from sales tax under S.No.162 of Table-I of 6th Schedule to the Sales Tax Act.

According to the manufacturers, rule 880 of the EFS Scheme, 2021 clearly stipulates that input goods may be imported free of sales tax and local input goods liable to sales tax shall be supplied against a zero rated invoice.

They have stressed that the proposed omission of S.No.21 in the presence of S.No.162 of 6th Schedule has created a serious anomaly whereby local material is subjected to sales tax whereas the same material is exempt from sales tax on import. This anomaly would result in putting the local polyester staple fiber at clear disadvantageous position vis-à-vis the imported fiber, they apprehended.

They have further maintained gat the exporters would prefer importing this fiber sales tax free under S.No.162 of the 6th Schedule of Sales Tax Act instead of procuring 18% sales tax laden local fiber in case this budget proposal is finally implemented as such. The exporters would also not like to procure local fiber and then undergo a cumbersome process of claiming sales tax refund thereon.

In order to ensure level playing field to the local industry as well as encouraging import substitution, the PSF manufacturers have requested to remove this clear anomaly and withdraw the proposed omission of S.No.21 in clause 5(20) of the Finance Bill 2024.

Copyright Business Recorder, 2024