Commercial importers to pay sales tax on retail price of imported goods, not on valuation ruling

KARACHI: The Finance Bill 2019 proposes that commercial importers of goods listed in Third Schedule will pay sales tax at import stage on ‘retail price’ instead of value determined under section 25 of the Customs Act, 1969 (as currently applicable for Commercial Importers).

Accordingly, the commercial importers will not be able to adjust input tax paid on other goods or services.

The Finance Bill proposes to bring the ‘Commercial Importer’ of goods listed in Third Schedule in the Retail Price Regime. Earlier Commercial Importers were included in such regime from 2003 till 2005. It means that the Commercial Import of goods listed in Third Schedule shall charge sales tax on Retail Price fixed by them, inclusive of all duties, charges and taxes (other than sales tax) at which any particular brand or variety of any article should be sold to the general body of consumers

The commercial imports of taxable goods (subject to certain exclusions) is also liable to minimum Value Addition Tax (VAT) at the rate of 3% ad valorem which is allowed to be adjusted against output tax but no refund will be allowed for such VAT amount.

However, such amount would be carried forward in subsequent periods for adjustment. It is pertinent to mention that imposition of 3% minimum VAT on Commercial Import of goods listed in Third Schedule will result in revenue stuck-up in the hands of FBR as it could not be adjusted against output tax and the commercial importers are not allowed to claim refund of such VAT amount. [the_ad id=”31605″]It appears to be an anomaly and commercial importer of goods listed in Third Schedule should be declared immune from 3% minimum VAT.

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