LTU falls short of Rs60bln in revenue in July-October

KARACHI: Large Taxpayers Unit (LTU) Karachi, the main arm of the Federal Board of Revenue (FBR), has missed its target for the first four months of the current fiscal year of 2018/19 by 15 percent or Rs59 billion owing to a significant decline in collection from petroleum and corporate sectors, official data showed on Wednesday.

The provisional figures showed that the LTU Karachi collected Rs351 billion during the July-October period as against the target of Rs410 billion set by the revenue board for the period. The unit, however, managed to post a nominal growth of two percent in revenue compared to the collection of Rs346 billion in the corresponding period of the last fiscal year.

Sources in LTU Karachi said the FBR set an ambitious growth of 17 percent year-on-year in revenue collection for the period despite realising downward trend in sales tax rates on petroleum, oil and lubricant (POL) products.

“The reduction in sales tax on POL products negatively impacted the sales tax collection on both domestic and import stage,” an official at LTU Karachi said, requesting anonymity. Sales tax collection of the unit registered two percent increase to Rs284.34 billion in the first four months. The collection amounted to Rs279 billion in the corresponding period of the last fiscal year.

In July-October, the sales tax collection from domestic supplies grew six percent to Rs58.73 billion compared to Rs55 billion in the corresponding period a year earlier. Sales tax collection on imports, however, registered a nominal growth of one percent to Rs226 billion.

Sales tax rates on motor spirit (petrol) witnessed a continuous decline since the start of the current fiscal year. Sales tax on petrol declined 16 percent in July over the same month of the last fiscal year. Sales tax on petrol was cut by 30 percent, 22 percent and 63 percent in August, September and October, respectively. Sales tax reduction for motor spirit was estimated at 61 percent for November alone.

Sales tax on high speed diesel (HSD) was raised by nine percent, 0.44 percent and 7.5 percent for July, August and September, respectively over the corresponding months a year ago. The government, however, decided to reduce sales tax on HSD by 15.54 percent year-on-year in October and a further 39.56 percent in November. For November, the government fixed sales tax rates on motor spirit and HSD at 4.21 and 12 percent, respectively.

The collection of direct taxes of the unit was flat due to issuance of refunds and adjustment made against tax liabilities of the taxpayers. The unit collected Rs48.5 billion as income tax in the four months period as against Rs48.32 billion a year ago.

Sources said quarterly tax payments from companies fell due to reduction in corporate tax rate to 29 percent. Lower profits of banking sector also hampered the revenue collection growth. The collection of federal excise duty grew three percent to Rs18 billion in July-October.