ISLAMABAD: The Senate Standing Committee on Finance Thursday supported imposition of 17 percent general sales tax on goods imported by the diplomats and diplomatic missions, but unanimously rejected withdrawal of sales tax exemption on baby formula milk, donations and contraceptives under the supplementary finance bill 2021.
The Senate Panel met on the second consecutive day with Senator Talha Mahmood in the chair to finalize and make recommendations in the Finance (Supplementary) Bill, 2021.
The committee gave clause by reading of the Bill and thoroughly debated on each point in the larger interest of the general public. The committee reserved discussions on several clauses on account that the data and statistics may be provided on the revenue generated in the previous regime so that it can be studied minutely to understand the rationale behind the proposed amendments. It supported imposition of 17 percent general sales tax on goods imported by the diplomats and diplomatic missions.
However, the panel unanimously rejected 17 percent GST proposed on jewelry industry. The proposed amendment from 1.5pc value of gold and 2pc value of diamond plus 3pc of making charges, to 17 % sale tax on articles of jewelry or parts of precious metal was rejected by the committee unanimously for crippling of the documented segment of the jewellery business and a drastic fall in the tax revenue of the state, similarly, the committee disposed of the petition by the matchbox industry on the proposed amendment of exemption of tax on matchboxes with the directive to retain the previous regime of sales tax on the matchbox industry on the same analogy of securing the documented industry and increased revenue in the interest of the state.
The committee failed to comprehend the rationale behind the proposed amendment which will result in encouraging the undocumented business industry. The committee noted that the proposed amendment is highly discriminatory as it will only affect the sales tax registered companies.
It transpired in the committee that 80 tons of gold is smuggled into the country annually. The Gold Association lamented that Pakistan has no gold import policy and tax system, “not only gold but also diamonds are being smuggled in”, according to the Progressive Jewellery Groups. The FBR officials informed the committee that 160 tons of gold is used annually in Pakistan, and the gold market in Pakistan is worth around Rs. 2.2 trillion. Of that only Rs. 29 billion gold market is declared in the Federal Board of Revenue. Similarly, "out of 36,000 goldsmiths, only 54 pay the goldsmith tax" the FBR informed.
The committee also unanimously rejected the proposed 17pc sales tax on formula milk and other products of a common good stating that such a sales tax affecting the growth and health of infants will bring shame to the country at the national level. The FBR Member Inland Revenue (Policy) informed the committee that the baby formula milk is a luxury item. Its price ranges between Rs 600 to Rs 24,000 per packet. The FBR will propose to provide subsidies to the people after imposition of 17 percent sales tax on baby formula milk. The government has identified persons under the Ahsaas program and targeted subsidy would be [rovied to the poor people, the FBR Member said.
The committee unanimously believed that it needs assurance whether or not, the recommendations of the committee will be acknowledged otherwise it is a futile exercise to spend countless hours debating on the matter without progressive results. “If the financial adviser and his team are not present then who will we put our recommendations to,” Musadiq Malik stated. The chairman Committee assured the members that he has spoken to the Finance Minister that the recommendations should be accepted in letter and spirit.
The members of the committee expressed frustration over the absence of the Federal Minister for Finance and Revenue Shaukat Tarin during the session. Senator Musadik Masood Malik told the panel that those who introduced the supplementary finance bill are absent from the meeting. The committee also expressed that the integrity of the committee may be maintained and the presence of the Minister, the Secretary and other high-level officials may be observed, maintaining the dignity and honour of such high-level parliamentary meetings.
Senator Kamil Ali Agha stated that the Federal Board of Revenue is a malicious entity, “It collects 450 billion rupees annually through various taxation regimes.” The chairman committee expressed his intent to form a committee to examine the tax collectors and inspectors as to where the millions of rupees come from, while their salaries would be Rs. 1 lakh, said the Chairman of the Committee.
Earlier in the meeting, the DRAP representative informed that the prices of the registered drugs will not be increased under the new GST regime. The DRAP informed that the drugs of therapeutic value prices will not be increased however the drugs of nutritional value will increase by 17pc sales tax. The committee observed that the solar panels have also been taxed at 17%, taxes are also being levied on imported bicycles. It proposed scrapping tax on up to 25,000 imported bicycles and imposition of duty on more than 25,000 imported bicycles.
The Member FBR informed the committee 17% duty on goods for donation to hospitals, educational institutions and other entities would also be imposed. Senator Sherry Rehman while expressing her reservations said people will stop donating such goods to hospitals, schools and other institutions. The committee rejected the proposal to impose a 17% tax on donations arguing "I will be reluctant to donate a machine to a hospital which would also be taxed."
The committee also rejected the proposal to impose sales tax on contraceptive drugs. Contraceptives were exempted from tax in previous finance bills, but are now being brought into the tax net, says FBR member.
The meeting was attended by Leader of the House in the Senate, Dr Shezad Waseem, Zeeshan Khanzada, Farooq Hamid Naek, Saleem Mandviwalla, Sherry Rehman, Mohsin Aziz, Kamil Ali Agha, Masudik Masood Malik, Dilawar Khan, Anwar ul Haq Kakar, Faisal Subzwari and Faisal Saleem Rehman. Chairman FBR, member FBR and senior officials of the attached departments were also in attendance.
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