KARACHI: The Federal Board of Revenue (FBR) has approved conducting stock-taking of closing stocks/inventories maintained by taxpayers of five zero-rated/reduced rate of tax sectors, so that inventories chargeable to 17 percent sales tax may be correctly brought forward.
As per SRO 1125(I)/2017, five zero rated sectors were chargeable to sales tax at the rate of zero percent or reduced tax rate. However, in the Finance Bill FY19, the federal government proposed to rescind SRO 1125 and consequently, the five zero rated sectors are proposed to be charged to sales tax at standard rate of sales tax of 17 percent on local sales with effect from July 01, 2019.
There is an apprehension of revenue leakage in the way that some taxpayers having massive inventories might under-declare their existing stocks.
Similarly, FBR has accorded approval for conducting stock taking of closing stocks/inventories (raw material as well as finished products) maintained by steel sector. Presently, steel melting furnaces and re-rollers are paying sales tax at reduced rate under Sales Tax Special Procedure Rules, 2007.
In the Finance Bill FY19, federal government proposed to charge the standard rate of sales tax of 17 percent to steel sector.