FBR issues summary of sales tax, FED measures introduced vide Finance Supplementary (2nd Amendment) Act

KARACHI: Federal Board of Revenue (FBR) has circulated a brief summary of the sales tax and federal excise duty measures, notified through Finance Supplementary (Second Amendment) Act, 2019, for ease of understanding and necessary action by the field formations.

Field formations of Inland Revenue and Customs are also advised to consult the provisions of Finance Supplementary (Second Amendment) Act, 2019 for proper appraisal of the measures introduced.

Payment of sales tax refunds through sales tax refund bonds:

To liquidate huge amounts claimed by taxpayers in refunds which have been accumulated over a long time, the government has decided to pay the same through sales tax refund bonds, which shall have a maturity period of three years. Simple profit at 10% per annum is also proposed to be paid. The claimants shall also be able to raise the much needed cash by selling these notes in the security market. A new Section 67A has been inserted in the sales Tax Act 1990 to include enabling provisions for payment of refund in this manner and also to provide for regulatory mechanism relating to issuance, transfer, redemption and other related matters.

Continuity of exemption on machinery and equipment relating to renewable energy:

In Sr. no 110 in Table 1 to the Sixth Schedule of STA 1990, already available exemption of sales tax in relation to plant, machinery and equipment required for power generation from renewable sources of energy has been guaranteed up to 30th June 2023, to provide for certainty and confidence to investors. Same protection has been ensured on the import side of the similar equipment as covered under Sr. No. 7 and S. No. 14A in Table 3 of the Sixth Schedule.

Addition of further items to the list relating to Ostomy procedures for treating cancer:

Keeping in view the difficulties being faced by cancer patients and also on the orders of the Supreme Court, items relating to Ostomy procedures for treatment of cancer patients, which were not expressly and exhaustively mentioned in the Sixth Schedule to the Sales Tax Act, 1990, have now been so covered by substituting Sr. No 117 and relating it to heading 99.25 in the First Schedule to the Customs Act.

Exemption on plant and machinery for Greenfield industries:

Presently, sales tax exemption on plant and machinery is available only to specified sectors. Other sectors have to pay sales tax on import of plant and machinery. This sales tax is adjustable against future output tax but such adjustment takes place after a long time when the industry starts selling its product. This serves as an impediment to investment by increasing initial costs. In order to encourage green field investment and industrialization, exemption from payment of sales tax on imported plant and machinery to be used for setting up new industry for production of taxable goods has been provided by amending Sixth Schedule to the Sales Tax Act, 1990, as imported by the persons registered on or after 1st July, 2019, through Sr. no 150 in Table 1 of the Sixth Schedule to the STA 1990.

New rates for the cellular mobile phones:

New rates on the import of cellular mobile phones have been introduced by substitution in the Ninth Schedule to the STA 1990.

Levy of federal excise duty on locally manufactured motor cars, SUVs and other motor vehicles having engine capacity 1800cc and above and increase in duty on imported cars/SUVs etc.:

Sr. No. 55 of Table 1 of the First Schedule to the FED Act 2005 has been amended and duty of the imported motor vehicles of 1800 cc to 3000cc has been enhanced to 25% ad val. Further, a new Sr. No. 55A been inserted whereby rate of federal excise duty has been enhanced to 30% ad valorem on import of motor cars, SUVs and other motor vehicles of cylinder capacity of 3000cc or above (other than those vehicles as designed for the transport of 10 or more persons).

Further, Federal excise duty on locally manufactured cars and SUVs etc. of engine capacity exceeding 1700cc and above at 10% ad valorem has also been introduced.

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