MARKET DEVELOPMENT
Rs 150 Billion ST Relief on Crude, Edible Oil Imports: SRO Withdrawal Plan No Great Help
Rs 150 Billion ST Relief on Crude, Edible Oil Imports: SRO Withdrawal Plan No Great Help
15/02/2014 (Business Recorder) - The withdrawal of two major Statutory Regulatory Orders (SROs) granting sales tax exemption on the import of crude oil and edible oil to the tune of Rs 150 billion per annum would not contribute to improving the revenue collection. Sources told Business Recorder on Friday that a SRO of the FBR has granted sales tax zero-rating on the import of crude oil having revenue impact of Rs 90 billion per annum.
Secondly, under entry number 24 of the Sixth Schedule of the Sales Tax Act, 1990, sales tax exemption is available on the import of edible oil including RBD palm oil. Alternately, the 16 percent FED has been paid under the Federal Excise Act 2005 on the import of edible oil. Thus, FED has been charged on the item in lieu of the sales tax. This sales tax exemption on the import of palm oil has revenue impact of Rs 40 billion on annual basis. SRO.549(I)2008 has granted sales tax-zero rating facility on the import of petroleum crude oil (PCT Heading 2709.0000) having revenue impact of around Rs 90 billion. This is the major SRO on the sales tax side having huge revenue impact of Rs 90 billion. The crude oil imported by refineries is though zero-rate, however it applies further process in shape of refining the oil for further supply to the oil marketing companies which subsequently attracts sales tax.
In case the government withdraws the sales tax zero rating facility on the crude oil, the refineries would be entitled to get input tax adjustment of sales tax paid at the import stage hence practically government would not get any additional revenue, as the whole amount of Rs 90 billion would be adjusted by the refineries.
Secondly, the FBR has imposed 16 percent federal Excise Duty in VAT mode on the import of palm oil whereas no sales tax has been charged at the import stage on the same product. If sales tax exemption has been withdrawn on the said item, the FBR has to take away FED on the import of palm oil as double taxation (17 percent sales tax as well as 16 percent FED) cannot be charged on the same product.
When contacted, a leading sales tax expert to comment on tax officials opinion, he was of the view that even by way of withdrawal of FED on palm oil, ie, 16 percent government would be able to collect sales tax @17 percent, ie, 1 percent excessive, furthermore application of sales tax through VAT mode or in shape of extra tax may result in substantial increase/growth of revenue whereas in case of FED is single stage levy is not instrumental in collecting maximum revenue collection.
Likewise, in case of withdrawal of zero rating on crude oil though refineries adjustment would be made by refinery but even in that case government would be able to complete the tax chain and any sort of leakage due to zero-rating would be controlled and resultantly government collects additional amount of revenue to some extent, tax expert added.
Secondly, under entry number 24 of the Sixth Schedule of the Sales Tax Act, 1990, sales tax exemption is available on the import of edible oil including RBD palm oil. Alternately, the 16 percent FED has been paid under the Federal Excise Act 2005 on the import of edible oil. Thus, FED has been charged on the item in lieu of the sales tax. This sales tax exemption on the import of palm oil has revenue impact of Rs 40 billion on annual basis. SRO.549(I)2008 has granted sales tax-zero rating facility on the import of petroleum crude oil (PCT Heading 2709.0000) having revenue impact of around Rs 90 billion. This is the major SRO on the sales tax side having huge revenue impact of Rs 90 billion. The crude oil imported by refineries is though zero-rate, however it applies further process in shape of refining the oil for further supply to the oil marketing companies which subsequently attracts sales tax.
In case the government withdraws the sales tax zero rating facility on the crude oil, the refineries would be entitled to get input tax adjustment of sales tax paid at the import stage hence practically government would not get any additional revenue, as the whole amount of Rs 90 billion would be adjusted by the refineries.
Secondly, the FBR has imposed 16 percent federal Excise Duty in VAT mode on the import of palm oil whereas no sales tax has been charged at the import stage on the same product. If sales tax exemption has been withdrawn on the said item, the FBR has to take away FED on the import of palm oil as double taxation (17 percent sales tax as well as 16 percent FED) cannot be charged on the same product.
When contacted, a leading sales tax expert to comment on tax officials opinion, he was of the view that even by way of withdrawal of FED on palm oil, ie, 16 percent government would be able to collect sales tax @17 percent, ie, 1 percent excessive, furthermore application of sales tax through VAT mode or in shape of extra tax may result in substantial increase/growth of revenue whereas in case of FED is single stage levy is not instrumental in collecting maximum revenue collection.
Likewise, in case of withdrawal of zero rating on crude oil though refineries adjustment would be made by refinery but even in that case government would be able to complete the tax chain and any sort of leakage due to zero-rating would be controlled and resultantly government collects additional amount of revenue to some extent, tax expert added.