FPCCI urges govt to reduce sales tax

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KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) in its proposals for the ensuing federal budget has urged the government to effectively use the sales tax scheme to broaden tax base, provided the standard sales tax rate is brought down to 7 per cent non-adjustable and non-refundable to be collected at a single stage at import or manufacturing point, except high tax earning sectors for the government.

The proposal added that “In the value-added chain industry tax may be collected at 0.5 per cent at each stage of value addition. However, since a single digit sales tax rate would require a lot of time for amendments in the Sales Tax Act, 1990 therefore, in the meantime the standard sales tax rate may be reduced to 15 per cent in VAT mode at the first stage and thereafter be reduced gradually at 1 per cent annually”.

The proposal is a part of the FPCCI presentation being prepared under the Chairmanship of FPCCI Senior Vice President Syed Mazhar Ali Nasir,and would be presented by the FPCCI to the high-ups of Ministries of Finance and Commerce and FBR for incorporation in the Federal Budget 2018-19 and to the concerned Standing Committees of National Assembly and Senate for seeking their support and recommendations.

The proposal argued that the prevailing rate of sales tax at 17 per cent in Pakistan is too high out of which its major part is refunded or adjusted and net tax in the kitty of government comes to around 5 per cent to 6 per cent. In Los Angeles, one of the richest state in USA, the sales tax rate is 9.25 per cent; India, 13.68 per cent; Indonesia 10  per cent and in most of the Far Eastern Countries, it is between 6 per cent to 8 per cent.