Sales tax collection drops to Rs500bln in nine months

KARACHI: The Federal Board of Revenue (FBR) managed to collect Rs500 billion from sales tax on imported goods in the first nine months of the current fiscal year of 2018/19, down 2.1 percent over the corresponding period a year earlier, as imports continued to slide on weak rupee and other regulatory measures, official data showed on Tuesday.

Sales tax collection amounted to Rs510.61 billion in the July-March period of the last fiscal year.

Merchandise imports fell more than 8.3 percent to $40.7 billion in the nine-month period, while in March goods imports sharply dipped 24 percent year-on-year to four billion dollars. In March, collection of sales tax on imported goods declined 11 percent year-on-year to Rs56.28 billion.

The officials attributed the fall in sales tax collection at import stage to reduction in rates introduced through Finance Act 2018.

The government reduced the sales tax from 17 percent, with additional 3 percent value- added tax, to 12 percent on import of liquefied natural gas.

There was also reduction in the rate of sales tax to two percent on all fertilisers and consequential reduction in rate of sales tax to five percent on supply of natural gas to fertiliser plants for use as feed stock to avoid accumulation of input tax.

The officials said the ban on non-filers to own cars in the last budget also resulted in drop in sales tax collection.

The restriction was relaxed for buying of up to 1,500cc cars in the second supplementary bill passed in March 2019.

The sources said the measures to relax regulatory duty on various raw materials also negatively impacted the sales tax collection. The measures taken by the government resulted in decline of import volume.

Pakistan Customs collects sales tax at import stage on behalf of Large Taxpayers Unit (LTU) Karachi. The customs authorities also collected federal excise duty on behalf of the LTU Karachi. Collection of FED posted a 15 percent growth in March 2019. The collection of FED was Rs677.72 million during the month as compared to Rs589 million in the same month of the last year. FED collection in the July-March 2018/19 grew nine percent to Rs7 billion.

The FBR estimated a revenue shortfall of Rs35 billion in the first six months of the current fiscal year alone due to reduction of sales tax rates on petrol and diesel. The government sharply reduced sales tax on high speed diesel and motor spirit to 12 percent and 4.5 percent from 37 percent and 22 percent, respectively, in the July-December period of FY2019. The government, however, kept the general sales tax rate unchanged at 17 percent from January onwards and it is expected to remain the same till June-end.