FBR imposes 25% sales tax on a wide range of luxury items

The Federal Board of Revenue (FBR) recently announced a new sales tax on luxury goods in Pakistan, aimed at boosting the country’s revenue and reducing its fiscal deficit. The tax applies to a range of luxury items, including aircraft, ships, jewelry, cosmetics, cigarettes, and vehicles in Completely Built Up (CBU) condition, as well as locally manufactured/assembled vehicles with an engine capacity of 1400cc and above.

According to an SRO 297(I)/2023 issued by the government on Wednesday, March 8, the sales tax shall be charged, levied and paid at the rate of 25% of the value of the goods imported and their subsequent supply or the retail price, as the case may be. The tax will be applicable to both imported and locally supplied goods.

The FBR has further clarified that the provisions of this notification shall not be applicable in respect of goods specified in the Eighth Schedule to the Sales Tax Act, 1990. The goods included in this schedule include computers, laptops, locally manufactured electric vehicles, road tractors for semi-trailers (Electric Prime Movers), electric buses, three-wheeler electric rickshaws, second-hand and worn clothing or footwear, cinematographic equipment, and other items specified in the Eighth Schedule to the Sales Tax Act, 1990.

In addition to the above, the FBR has imposed a 25% sales tax on a range of other goods. These goods include aerated water and juices, confectionery, vehicles in CBU condition, sanitary and bathroom wares, carpets (excluding those from Afghanistan), chandeliers and lighting devices or equipment, chocolates, cigarettes, cigars and e-cigarettes, corn flakes and other ready-to-use cereals, cosmetics and shaving items, tissue papers, crockery, kitchenware, and tableware, household articles, decorations or ornamental articles, dog and cat food only, doors and window frames, fish, footwear, fruits and dry fruits (excluding those imported through land route or barter mechanism), furniture, home appliances CBU, ice cream, jams, jellies, preserved fruits and fruit and vegetable juices, leather jackets and apparels, mattress and sleeping bags, fresh, chilled, frozen, preserved or processed meat, musical instruments, pasta, arms and ammunition (excluding defence stores), shampoos, sunglasses, tomato ketchup and sauces, a ship designed or adapted for use for recreation or pleasure or private use, an aircraft designed or adapted for use for recreation or pleasure or private use, articles of jewelry (both precious metals and imitation), wristwatches, locally manufactured or assembled SUVs and CUVs, locally manufactured or assembled vehicles having an engine capacity of 1400cc and above, and locally manufactured or assembled double cabin (4×4) pick-up vehicles.

This new tax regime is expected to generate significant revenue for the government, which has been grappling with a widening fiscal deficit and the economic fallout of the COVID-19 pandemic. The FBR has urged all relevant parties to comply with the new regulations and pay the required sales tax in a timely and accurate manner.