ISLAMABAD: The Federal Board of Revenue (FBR) imposed on Friday two per cent additional sales tax at the level of the manufacturer on several items, to be worked out on the basis of actual value-addition.
The existing GST rate on these products is 17pc.
“This is not a new tax or an increase in the existing rate, but only collection of tax which even otherwise was payable by the supply chain,” the FBR said in a statement.
The 19pc GST which will be collected from manufacturers at the factory level will now be part of the actual price for end-users and may not be printed on the products.
The items on which 2pc additional GST will apply are: air-conditioners, refrigerators, deep freezers, televisions, recorders and players, electric bulbs, tube-lights, fans, electric irons, washing machines, telephone sets, gas ovens, geysers and heaters, foam or spring mattresses and other foam products for household use, auto parts and accessories, lubricating oils, brake, transmission and other vehicular fluids and maintenance products, tyres and tubes, storage batteries, arms and ammunition, paints, distempers, enamels, pigments, colours, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing, tiles, biscuits, confectionary, chocolates, toffees and candies.
The FBR issued four notifications on Friday to notify the decisions.
The concept of charging sales tax on the basis of retail price is to charge the tax of the entire supply chain from manufacturers till retail stage and upfront from the manufacturer.
The FPCCI, KCCI and trade associations recently approached the FBR for an alternative mode of tax collection from dealers, distributors and retailers of these goods and said the condition of charging the tax at the retail stage might be done away with. Consequently, the FBR omitted these items from the Third Schedule to the Sales Tax Act, 1990, and imposed 2pc additional tax on these items to be paid by manufacturers in consultation and with the consensus of trade bodies to provide relief to the business community.
“The rate of 2pc tax was worked out on the basis of actual value-addition of these sectors from the manufacturers till the retail stage,” the FBR statement said, adding that the chambers and trade associations were of the opinion that it was practically impossible for them to comply with the requirement of printing retail price on each and every item because prices of these goods varied from market to market because of various factors.
A tax expert told Dawn that now the tax would be levied at the factory price instead of retail price which would provide enough room for understatement of the actual price of products. This will be a challenge for the FBR to keep a check on manufacturers to declare actual price for the purpose of taxes.
According to the FBR notifications, sales tax on import and domestic sale of fabrics has been reduced from 5pc to 3pc. The value-addition tax at the rate of two per cent was also levied on commercial import of fabrics.
At the same time, raw materials used in manufacturing of fabrics, which were charged with 17pc tax, will be refunded to the textile sector. The tax on raw materials is 2pc.
The rate of withholding tax on goods transport vehicles has been reduced to Rs3 per kg from Rs5. The tax was increased from Rs1 per kg to Rs5 last year.
The rate of withholding tax on purchase of taxable goods from unregistered persons has been reduced to 1pc from 17pc. However, this tax will not be adjustable. The rate of withholding tax on purchase from registered persons has been reduced to one-tenth from one-fifth. Withholding agents with free tax number can also withhold sales tax on purchase from unregistered persons.
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