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June 22, 2021

Senate panel advises withdrawal of tax on small used vehicles

ISLAMABAD: Senate Standing Committee on Finance on Monday advised the government to abolish lifetime token tax on small old vehicles and reduce tax on cosmetics.

The recommendations were made after a daylong discussion on the budget for 2021/22. During the proceedings, senator Saleem Mandviwalla asked the Federal Board of Revenue (FBR) to explain the rationale behind the imposition of a standard rate of 17 percent sales tax on the import and supply of crude oil.

“If the tax is adjustable then why the FBR has imposed sales tax on crude oil,” said Mandviwalla. The FBR informed the senate standing committee on finance that the 17 percent sales tax imposed on crude oil is an adjustable tax which would help the FBR to have funds despite the facility of sales tax adjustment.

The FBR’s official informed the committee that the crude oil was zero-rated for the last many years. Now 17 percent sales tax has been imposed on crude oil but it is in adjustable mode.

Senator Sherry Rehman said there is a parallel mini-budget running along with the current review of the Finance Bill 2021 at the parliament house. “When we are debating on the finance bill, why is there a parallel budget running in the country. There is no transparency in the process of budget finalisation as the actual budget is taking place outside the parliament house,” Rehman from an opposition political party said. Senator Talha Mehmood, chairman of the committee directed the National Tariff Commission (NTC) to protect the domestic industry and discourage commercial importers.

NTC officials informed the committee that a meeting of the National Tariff Policy Board would address all the issues of domestic industries including filament yarn manufacturers.

Senator Shibli Faraz said each recommendation of the committee must accompany the revenue impact of acceptance or rejection of the taxation proposals of the finance bill 2021. The committee must know the positive or negative revenue impact of each recommendation of the senate finance committee.

Faraz said there should be some symbolic tax on exempted items. Even the government may impose only Re1 as tax on exempted items, but there must be some symbolic tax.

The private Hajj, Umrah tour operators requested the parliamentarians for the restoration of the fixed tax scheme, which was allowed during the tenure of the last government. The fixed tax was passed by the parliament and only it could restore the tax.

The committee was informed that the unnecessary notices to lockdown-affected business community associated with Hajj, Umrah tour operators are highly deplorable. The offices of the Hajj operators have been sealed by the FBR's field formations on account of non-payment of withholding tax. The matter of tax from Hajj operators is pending before the higher courts. The senate standing committee on finance directed the FBR to examine the letter of the Hajj operators and also directed the ministry of religious affairs and interfaith harmony to give its viewpoint on the issue.