The government of Pakistan in the upcoming budget 2015-16 has proposed imposition of standard sales tax on cotton with a view to generating about Rs 50 billion revenue. Currently, sales tax exemption is available on local cotton a 5 percent sales tax is applicable on the import of cotton.
The government has set cotton target for the next season (2015-16) at 15.49 million bales against the revised target of 13.48 million bales for the outgoing season (2014-15). The government had set initial target of 15.1 million bales for the current season (2014-15), however later the target was revised three times to finally set at 13.48 million bales due to multiple issues including water shortage, rains/floods, and shortage of certified seed. According to sources the revised target is close to the revised target and will be achieved.
In last budget, 5 percent sales tax was imposed on a number of items imported by seven sectors under SRO.575(I)/2006 including machinery and equipment for development of grain handling and storage facilities. In accordance with the policy of reviewing SROs, seven sectors ie Sr. No. 2, 3, 4, 9, 15, 20 and 30 of SRO were charged at reduced rate of 5% sales tax. The concessions for the socially sensitive sectors were retained. However, the concessions against S. No. 8, 16, 17, 24, 25, 32, 33, 37 and 38 were withdrawn.
The FBR had transposed SRO.727(I)/2011 to Schedule with 5 percent rate of sales tax. This notification grants exemption on import and supply of plant and machinery not manufactured locally subject to certain conditions. Sales tax was charged at reduced rate of 5 percent on such plant and machinery, subject to the same conditions, by transferring the notification to the relevant Schedule of the Sales Tax Act, 1990.
The FBR had transposed SRO 549(I)/2008, dated11.06.2008 to Fifth Schedule. This notification grants zero-rating on certain goods, including petroleum crude oil, certain raw materials for export oriented sectors, etc. Since this zero-rating is considered essential, while the notification is required to be deleted, items in the notification were transferred to the Fifth Schedule of the Sales Tax Act, 1990.
The FBR had transposed SRO 551(I)/2008, dated 11.06.2008 to Schedules with certain changes. This notification grants exemption to a number of goods such as raw material for pharmaceutical industry, iodized salt, medical equipment, components of energy saver lamps, renewable energy items, raw cotton and oil seeds for sowing, etc. The FBR has transposed SRO 501(I)/2013, dated 12.06.2013 to Schedules with certain changes. The FBR has rescinded SRO 69(I)/2006, dated 28.01.2006. This notification grants reduced rate of sales tax 14 percent to rapeseed, sunflower seed and canola seed. The notification was rescinded, thereby charging standard rate of sales tax (17 percent) on these seeds.
Finance Minister Ishaq Dar chaired a meeting of a high-level committee of secretaries, held in the Federal Board of Revenue (FBR) reviewing certain SROs to finalize the list of such orders as budget date is approaching.
According to sources, a menu of budget proposals was shared with all the participants for generating revenue for the financial year 2015-16.
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