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Auditor General asks FBR to withdraw sales tax exemptions

Auditor General asks FBR to withdraw sales tax exemptions

ISLAMABAD: Auditor General of Pakistan (AGP) recommended to the Federal Board of Revenue (FBR) to withdraw sales tax exemptions on certain sectors including imports and especially zero-rating of sales tax on dairy and meat products.

The Auditor-General further stated dairy and meat are the two fast-growing sectors of the economy while livestock including dairy, poultry and meat contributes roughly 12% towards Gross Domestic Production (GDP).

Auditor General has recommended in its special audit report on tax expenditure that other than food items, the major exemptions of sales tax at import stage are provided to telecommunication equipment including cellular phones and SIM cards, pharmaceuticals and all kinds of machinery.

Auditor General also suggested there is a need to re-evaluate these exemptions. Auditor General advised that in the long run, income earned by mutual funds, venture capitals or investment companies and oil and mining companies which enjoy unlimited income tax exemptions in terms of concessionary rates may also be brought under the normal tax regime.

Auditor General observed that exemptions and concessions under the Second Schedule are too many and too generous. He advised that in the short run, income earned by IPPs, export of information technology service, reduction in minimum tax liability to cigarette and pharmaceutical distribution and tax credit for person registered under sales tax may be withdrawn.