The sales tax collection from local stage or domestic consumption witnessed a growth of only 8 percent in 2017-18 when compared with 2016-17, while sales tax collection from imports increased by 16 percent during the period under review.
According to the FBR Year Book for 2017-18 issued here on Friday, during 2017-18, sales tax remained second among top revenue generating sources of federal taxes receipts after direct taxes. It constituted around 39% of the total net revenue collection. Collection during FY 2017-18 has been around Rs 1,491 billion against around Rs 1,329 billion collected in the previous fiscal year. Overall sales tax collection grew by 12.2% and around Rs 162 billion of additional amount was collected during FY 2017-18 as compared to the collection of previous year. The revenue target of sales tax has been met to the extent of around 96% of the assigned target of Rs 1,547 billion for the FY 2017-18.
Domestic sales tax collection grew by 8%, whereas collection of sales tax on imports increased by 16%, the FBR said.
Within sales tax, the share of sales tax on imports (STM) is around 55% and that of domestic sales tax is around 45% during 2017-18. This composition is changing and the share of STM is slowly rising as compared to sales tax domestic during the last couple of years. The declining share of Sales Tax Domestic (STD) is not a good omen for revenue mobilization efforts. Therefore, the concerned wing needs to review the causes and take necessary measures to enhance STD revenue.
The sales tax monthly growth trend remained highly volatile, on one hand in the months of July, September, January and April the growth was 23.3%, 30%, 32.9% and 19.2% respectively. On the other hand a very low growth was recorded in August (1.3%), March (5.6%) and June (-) 20.6%. In the month of June 2018 in absolute terms, the collection was lower by Rs 37 billion as compared to June 2017. Negative growth to the tune of 20.6% in the month of June is highly unexpected collection trend. Further bifurcation indicates that the sales tax domestic has performed more poorly as compared to sales tax imports. The collection of sales tax domestic recorded 9.1% negative growth in June 2018. However, the growth of sales tax imports in the month of June 2018 was just 1.6%, which was also not desirable.
Sales Tax Domestic Collection: The overall net collection of Sales Tax Domestic (STD) was Rs 676.6 billion against Rs 626.4 billion in the previous fiscal year and the net collection grew by 8%. In absolute terms Rs 50.2 billion additional amount of revenue has been collected in FY 2017-18 as compared to previous fiscal year.
Major Revenue Spinners of STD: The collection of sales tax domestic is concentrated in few commodities. The major commodities are petroleum products, electrical energy, cement, sugar, aerated water/beverages and cigarettes, which shared around 68% of sales tax domestic revenue.
The collection from POL products, the top revenue generating source, with 41.8% share grew by 25.3% during FY 2017-18. The collection from natural gas, iron & steel, cigarettes and other withholding agents recorded a growth of 73.7%, 21%, 16.9% and 10.5% respectively during the period under review. On the other hand negative growth was recorded in cement, electrical energy, sugar and food products.
The FBR said that the sales tax on imports is a significant component of federal tax receipts. The share of STM in total sales tax net collection has reached around 55%. The net collection of STM during FY 2017-18 stood at Rs 814.6 billion against Rs 702.6 billion in FY 2016-17, registering a growth of 16%. The growth in STM collection is attributable to around 21% growth in the import value during FY 2017-18.
Top 10 commodities of sales tax import have contributed the major chunk i.e. 80.1% in STM collection. The detailed data indicated that around 57.4% of STM is contributed by POL products (Ch:27), machinery (Ch:84 & 85), iron & steel (Ch:72) and vehicles (Ch:87). Like sales tax (domestic), petroleum is the leading source of sales tax collection at import stage as well. Its share in collection from sales tax imports is around 32%. During FY 2017-18, collection from POL products was Rs 264 billion against Rs 212 billion during FY 2016-17, reflecting a growth of around 25%.