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July 10, 2019

Sales tax collection from imports slips to Rs686.5bln in FY2019

Business

July 10, 2019

KARACHI: Sales tax collection from imports fell 2.4 percent to Rs686.54 billion during the last fiscal year of 2018/19 as oil shipments contracted, while the government exempted certain inbound shipments from taxes during the period, sources said on Tuesday.

The collection of sales tax at the import stage amounted to Rs703.36 billion in the preceding fiscal year of 2017/18.

The sources in the Large Taxpayers Unit (LTU) Karachi attributed the decline in sales tax to the lower value of petroleum products, restrictions imposed on imported vehicles and tax exemptions to liquefied natural gas (LNG) and imports under various treaties.

LTU Karachi has jurisdiction over collection of sales tax on imports. The sources said huge chunk of sales tax could not be materialised due to restriction on imports of furnace oil.

The government during the last fiscal year adopted a policy of facilitating LNG consumption by restricting furnace oil.

Import of petroleum products witnessed 33 percent decline to 9.3 million tons during 11 months of fiscal year 2018/19. Declining import of petroleum products resulted in shortfall of around Rs66 billion on account of sales tax at the import stage.

The sources said the previous government and the present governments kept sales tax rates on the lower side to facilitate the masses during the last fiscal year, which hurt the revenue collection.

The government, however, agreed to the International Monetary Fund (IMF) to keep 17 percent as the minimum sales tax rate on petroleum products under a loan program. Pakistan and IMF last week reached a $6 billion bailout deal.

The other factors for decline in sales tax collection at the import stage included exemptions and concessions allowed to various imports during the last fiscal year. Cost of exemptions and concessions in sales tax increased 113 percent to Rs598 billion during the last fiscal year. The figure was Rs281 billion in the preceding fiscal year.

The sources said the previous government announced massive exemptions and concessions at the cost of revenue collection in the budget 2018/19. Exemptions and concessions allowed on imports under the Eight Schedule of Sales Tax Act, 1990 massively increased to Rs63 billion during the last fiscal year compared with Rs19.3 billion in the preceding fiscal year.

The government announced various revenue measures, including abolishing of certain exemptions and concessions on imported goods, in the budget for the current fiscal year. The collection of federal excise duty on imported goods increased nine percent to Rs9.69 billion during the last fiscal year.

Sales tax on imports is collected by four customs collectorates, including appraisement east, appraisement west, preventive collectorate and Port Qasim collectorate.

The combined collection of sales tax and federal excise duty by the four collectorates was at Rs696.23 billion in the last fiscal year compared with Rs712.2 billion in the preceding fiscal year, posting a decline of 2.3 percent.

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