Sales tax, FED collection from imports declines to Rs338.4bln in first half

KARACHI: Sales tax and federal excise duty (FED) collection from imports nominally declined to Rs338.4 billion during the first half of the current fiscal year of 2018/19 , the official data showed on Friday.

The Large Taxpayers Unit’s (LTU) collection fell 0.3 percent from Rs339.3 billion in the corresponding period of the last fiscal year.

Officials at the LTU Karachi said lower rates of sales tax on import of petroleum products resulted in fall of revenue collection at the import stage. The officials said the government cut sales tax in order to provide relief to the masses on higher international oil prices.

Sales tax on petrol was eight percent in December 2018 as opposed to 17 percent in December 2017. Sales tax on high speed diesel oil was 13 percent in December 2018 as against 31 percent for the same month a year earlier.

The lower sales tax rate was the major reason behind a significant shortfall in revenue collected by the Federal Board of Revenue (FBR) during the first half. The FBR faced shortfall of Rs170 billion during the July-December period; of which Rs80-90 billion was due to lower sales tax on petroleum products.

The officials said imports restriction also impacted the revenue collection of both sales tax and FED. In July-December, collection of sales tax on imports fell 0.2 percent to Rs333.74 billion. Collection of FED declined five percent to Rs4.65 billion.

In December, collection of sales tax and FED dropped one percent year-on-year to Rs55.38 billion. Collection is, however, likely to improve on import stage as the government increased sales tax to 17 percent on all basic petroleum products effective from January 1, 2019.

The FBR estimated Rs24 billion in additional revenue from petroleum products during the second half as a result of upward revision in sales tax rates. It estimated around four billion rupees a month in additional revenue with the increase in sales tax on petroleum products.

Sales tax was increased to flat 17 percent on all basic petroleum products as opposed to eight percent on petrol, 13 percent (high speed diesel), two percent (kerosene) and 0.5 percent (light diesel oil) in December last year.

The FBR has to meet revenue collection target of Rs4.435 trillion for 2018/19. Oil sales sharply fell 32 percent to 9.2 million tons during the first half as the government’s shift to alternative fuel for power generation brought furnace oil off-take down. Furnace oil sales steeply declined 67 percent to 1.5 million tons in the July-December period over the corresponding period a year earlier. The FBR faced Rs80-90 billion shortfall in revenue from petroleum products in the July-December period due to declining sales and tax reduction.