The Federal Board of Revenue (FBR) has been granted the authority to set the value of imported retail items for sales tax purposes at a rate of 130 percent of the value fixed by the Board.

This decision, outlined in a recent sales tax circular, applies to items listed in the Third Schedule, which are subject to printed retail prices.

According to the circular, the FBR can determine the value of supply for these imported items, and sales tax will be calculated at 130 percent of this value, inclusive of customs duty, federal excise, and other applicable taxes, but excluding sales tax. This adjustment is in line with the first proviso to clause (46) of section 2 of the Sales Tax Act (STA), as amended by the Finance Act, 2024.

The FBR clarified that this provision allows the Board to fix the value of any imported goods or taxable supplies if deemed necessary. The Board can set different values for various classes or descriptions of the same type of imported goods or supplies.

The amendment specifically empowers the FBR to fix the value of supply for Third Schedule items, which are subject to an 18 percent sales tax on the retail price under clause (a) of sub-section (2) of section 3 of the STA. This fixed value will be used to determine the retail price as defined in Section 2(27).

For instance, in the case of imported tea, the FBR had previously issued Sales Tax General Orders (STGO) No. 104 of 2019 and No. 103 of 2019, mandating that importers pay sales tax on the retail price, which must be at least 130 percent of the imported value, including assessed customs duties, excise duty, and other applicable taxes, excluding sales tax. The balance of the sales tax, based on the retail price, must be paid along with the sales tax return.

This move aims to ensure accurate tax collection and compliance with the updated provisions of the Sales Tax Act.