ISLAMABAD: Federal Board of Revenue (FBR) will collect 3 percent minimum value addition sales tax on all sorts of imported goods, from July 1, 2019, including raw materials and intermediary goods meant for use in an industrial process, which are subject to customs duty except duty slabs of 16 or 20 percent.
According to media, under the Finance Bill 2019 presented before the National Assembly, a tax expert explained that the Twelfth Schedule has been included in the Sales Tax Act through Finance Bill 2019. An FBR official said that the FBR excluded certain provision of law from special procedures and made it part of the sales tax law. This proposed change, did not have any revenue impact because there is no increase in tax. The FBR has not imposed any new tax as the relevant special procedure rule pertaining to the minimum value addition tax has been made part of the Sales Tax Act. The minimum value addition tax is already applicable under the rules and no new tax has been imposed at the import stage, he added.
A tax expert said that the rule58 (payment of sales tax on account of minimum value addition) of the sales tax special rules 2007 does not specify that: “The value addition tax shall not be charged on the raw materials and intermediary goods meant for use in an industrial process which are subject to customs duty at 16% or 20% ad valorem under First Schedule to the Customs Act, 1969”. This means that other customs slabs would now be subjected to the 3 percent minimum value addition sales tax, expert added.
Tax expert added that the exclusions from 3 percent minimum value addition tax as applicable under sales tax special rules 2007 has now been narrowed down under the Finance Bill 2019. The section 7A of the Sales Tax Act has been amended through the Finance Bill 2019. The amended section said: Notwithstanding anything contained in this Act or the rules made thereunder, in respect of the goods or class of goods specified in the Twelfth Schedule, the minimum value addition tax, against the value added by the registered person, shall be payable, at the rate and by the registered persons or class of registered persons, specified therein, subject to the conditions, limitations, restrictions and procedure specified therein, it added.
As per Twelfth Schedule of the Sales Tax Act, the sales tax on account of minimum value addition as payable under this Schedule (hereinafter referred to as value addition tax), shall be levied and collected at import stage on all taxable goods as are chargeable to tax under section 3 of the Act or any notification issued there under at the rate specified in addition to the tax chargeable under section 3 of the Sales Tax Act or a notification issued there under:
The value addition tax under this Schedule shall not be charged on the raw materials and intermediary goods meant for use in an industrial process which are subject to customs duty at 16% or 20% ad valorem under First Schedule to the Customs Act, 1969 and the petroleum products falling in Chapter 27 of Pakistan Customs Tariff as imported by a licensed Oil Marketing Company for sale in the country; registered service providers importing goods for their in-house business use for furtherance of their taxable activity and not intended for further supply; and cellular mobile phones or satellite phones, Finance Bill 2019 said.