KARACHI: Government of Pakistan through Federal Budget 2017-18 has reduced sales tax on fertilizers to replce subsidy.
Due to complications in payment of subsidy to fertilizers manufacturers and importers, the subsidy is proposed to be substituted with reduction in sales tax rates on various fertilizers. Instead of ad valorem rates, specific rates have been proposed. Sales tax on DAP is reduced by Rs300/bag. However, the rate on urea fertilizer shall remain unchanged at 5.0 percent ad valorem.
Sales tax on import of seven types of poultry machinery is proposed to be reduced to 7.0 percent. Exemption from sales tax is announced on combined harvesters. Presently, combined harvesters are subject to sales tax at 7.0 percent ad valorem under Eighth Schedule. It is proposed to provide exemption from whole of sales tax on combined harvesters upto five years old by inserting an entry in the Sixth Schedule.
Exemption from sales tax is announced on agriculture diesel engine. Sales tax on agricultural diesel engines (from 3 to 36 HP) is proposed to be exempted. Enforced through Finance Bill, 2017, effective from 01.07.2017.
Exemption from sales tax is announced on imported seeds for sowing. Presently, imported oil seeds are subject to sales tax 5.0 percent under Eighth Schedule. Exemption from payment of sales tax is being provided on import of sunflower and canola hybrid seeds meant for sowing.
Exemption from sales tax is being provided on import of multimedia projectors by educational institutions.
In order to enable industrial consumers to avail input tax adjustment on lubricating oils purchased from the traders, the entry relating to lubricating oil is being omitted from Chapter XIII of the Sales Tax Special Procedures Rules, 2007, thus withdrawing the levy of 2.0 percent sales tax on lubricating oils.
Reduction in sales tax is announced on import and supply of hybrid electric vehicles. Reduction in sales tax at the rate of 50 percent is available on import of Hybrid Electric Vehicles upto 1800cc and at the rate of 25 percent on Hybrid Electric Vehicles exceeding 1800cc. It is proposed to maintain reduction in sales tax at the rate of 50 percent on Hybrid Electric Vehicles having engine capacity upto 1800cc and restrict reduction at the rate of 25 percent on engine capacity from 1801cc to 2500cc only. Similar reduction is proposed to be provided on local supply of the said two categories of Hybrid Electric Vehicles.
Existing exemption available to items for renewable sources of energy is proposed to be aligned with exemption available to these items under the Customs Act, 1969. Exemption from sales tax is proposed to be provided to items for conservation of energy on the pattern of exemption available under the Customs Act, 1969. Exemption is proposed to be provided to parts and components for manufacturing LED lights on the pattern of exemption available under the Customs Act, 1969.
Moreover, Sales tax withholding is proposed to be withdrawn on supplies from registered persons to other registered persons with the exception of advertisement services.