Sales tax on imports increases 20pc to Rs329bln in 5 months

KARACHI: Collection of sales tax on imports increased 20 percent to Rs329.58 billion during the first five months of the current fiscal year owing to withdrawal of zero-rated regime and application of normal tax rates on raw materials for export-oriented industries, sources said on Wednesday.

The sources in Large Taxpayers Unit (LTU) said collection of sales tax on import stage increased from Rs274.16 billion in the corresponding months of the last fiscal year. LTU has jurisdiction over collection of sales tax and federal excise duty (FED) on import stage.

The government last year abolished the sales tax zero-rated regime for manufacturers and exporters and brought the sales tax rate back to 17 percent.

The sources said the zero-rating created loophole in the system as ‘unintended’ beneficiaries / non-exporters were availing the benefits. Reduced sales tax rates for finished goods were also harming revenues, they said.

The sources said the tax authorities identified massive misuse of zero-rated on import of fabric and processed fabrics. After the abolishing of sales tax zero-rating regime the tax authorities have made arrangements to ensure disbursement of collected sales tax amount in the shape of refunds within 72 hours to facilitate the exporters.

The sources said the increase in sales tax collection is important despite decline in foreign trade volume during the period. Total import bill, during the first five months of current fiscal year, fell 19.27 percent to $19.04 billion.

That was compared with $23.59 billion in the corresponding period of the last fiscal year.

All the customs collectorate in Karachi collect sales tax at clearance stage and transfer the amount of sales tax to LTU Karachi.

Sales tax collection by Port Qasim Collectorate posted 32 percent growth during the period under review. The collectorate collected Rs157.66 billion as sales tax in July-November 2019 when compared with Rs119 billion in the corresponding period of the last fiscal year.

Customs Collectorate Appraisement (East) Karachi collected Rs93 billion as sales tax during the five months, showing growth of 10 percent when compared with Rs83.9 billion in the same period of the last fiscal year.

The collection of FED posted eight percent growth to four billion rupees during July-November 2019 when compared with Rs3.7 billion in the corresponding period of the last fiscal year.