PTI government proposes to rescind SRO 1125

KARACHI: PTI government has proposed to rescind SRO 1125(I)/2011, thus restoring standard rate of 17 percent on import of raw materials by five value added export oriented sectors.

SRO 1125(I)/2011 provides for zero-rate of sales tax on inputs and products of five export-oriented sectors i.e. textile, leather, carpets, sports goods and surgical goods.

The objective was to resolve delay in refund payments. However, zero-rating has created loophole and the benefit is being availed by unintended beneficiaries / non-exporters. Reduced rates for finished goods are also harming revenues.


To streamline and prevent revenue leakage, SRO 1125 be rescinded, thus restoring standard rate of 17%; the rate of sales tax on local supplies of finished articles of textile and leather and finished fabric may be raised to 17%; however, retailers opting for real time reporting shall be given a relaxation of rate which shall then be charges at 15%; zero-rating of utilities be withdrawn; refund of sales tax to these sectors be automated, thus ensuring that the sales tax paid on inputs is immediately refunded.

Refund Payment Orders (RPOs) shall be immediately sent to State Bank of Pakistan (SBP) for payment, while ginned cotton which is presently exempt is proposed to be subjected to reduced rate of 10%.

An official said rescinding of SRO 1125 would have no impact on value added exporters as the refunds would be fast, while it would also discourage misuse of the facility.

Expalining the reasons for step, the finance bill states that zero rate regime has created loop holes and unintended beneficiaries, non-exporters are taking advantage of the said SRO.

The step was envisaged to streamline and prevent the revenue leakage, the finance bill said adding that impact would be the restoration of standard rate of 17 per cent Sales tax.  However retailers opting for real time reporting shall be  given relaxation and will be charged at 15 per cent, it added. The zero rating of the utilities was also be withdrawn, finance bill said.

The automation of Sales Tax refund was also envisage in order to ensure that refund is executed without any delay.The Refund Payment Orders will be on passed to SBP immediately for payment. The Ginned Cotton which was exempted at present  was also proposed to be subjected to reduce of 10 per cent.

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