KARACHI: The Federal Board of Revenue (FBR) has notified zero-rate sales tax on supplies by export oriented sectors.
The FBR issued SRO 491(I)/2016 amending SRO 1125(I)/2011. As per the notification goods useable as industrial inputs by five export sectors, including fabric will be subject to zero percent for goods:
The category for availing zero percent included: import for in-house consumption by registered manufacturers of the five sectors; commercial imports; supplies to registered or unregistered persons of the said five sectors, excluding supplies of finished fabrics; import by, or supply to, registered manufacturers, whether or not of the said five sectors, for the manufacture of goods; supplies of finished fabric to manufacturers of five sectors.
However, five percent sales tax to be applicable on supplies of finished fabric to and by retailers, supplier of finished fabric to end consumers and other supplies of finished fabric. Further, 17 percent sales tax will be applied on supplies to persons outside the five sectors.
The zero-rate sales tax is also allowed on processing of goods owned by other persons, by registered manufacturers of the five sectors. However, five percent sales tax has been applied on locally manufactured finished articles of textile and textile made-ups and leather and artificial leather supplies to any person, including retail sales.
Imported finished goods of five sectors ready for use by the general public will be subject to 17 percent sales tax plus two percent value addition tax on import stage and 17 percent on supply thereof.
The SRO said that a registered person who has consumed inputs acquired on payment of sales tax, shall be entitled to input tax adjustment, subject to the relevant provisions of the Sales Tax Act, 1990 and Rules. However, no input tax credit or refund shall be admissible on the packing material of all sorts. Further, the FBR said that the post-refund audit and scrutiny shall be conduct and finalized in the manner as provided in the Sales Tax Rules, 2006.
The FBR further said that supply of furnace oil, diesel oil and coal to the registered manufacturers of the five sectors shall be charged at the rate of zero percent subject to the issuance of a general order by the board.
The SRO is applicable from July 01, 2016.