In a bid to capture the supply chain and broaden the tax base, the Federal Board of Revenue (FBR) has announced significant amendments to the sales tax regime through the Finance Act, 2024.
Key among these changes is the withdrawal of sales tax zero-rating on several items, including stationery (excluding exercise books), packaged milk, fat-filled milk, and local supplies to registered exporters.
On Monday, the FBR detailed several important changes introduced in the Eighth Schedule of the Finance Act, 2024. Notably, imported LPG and supplies by integrated outlets of textile and leather articles have been moved to the standard tax regime by omitting serial numbers 58 and 66 from Table-1 of the schedule.
Additionally, the reduced sales tax rate of 1% on medicaments classified under Chapter 30 of the First Schedule to the Customs Act, 1969, has been withdrawn. These medicaments will now be subject to the standard tax rate of 18%.
The FBR also announced that certain goods, which were previously exempt, will now be subject to a reduced sales tax rate of 10%. These goods include specified stationery items, tractors, oil cake, poultry/cattle food, various seed meals, vermicelli, and sheer mal.
In another significant change, the sales tax rate on imported laptops and computers has been increased from 5% to 10%.
The Finance Act, 2024, also aims to broaden the tax base and enhance revenue by withdrawing or shifting exemptions available to certain goods under Table-1 and Table-2 of the Sixth Schedule to the Eighth Schedule, making them liable to a reduced tax rate. Exemptions on edible vegetables and fruit imported from Afghanistan, diagnostic kits or equipment, and cinematic machinery and equipment have been removed.
Items shifted to the Eighth Schedule for sales tax at a reduced rate include stationery items (other than textbooks), oil cake and other solid residues, tractors, vermicelli, sheer mal, bun, rusk, poultry feed, cattle feed, sunflower seed meal, rape seed meals, and canola seed meal.
Furthermore, the FBR has introduced new exemptions in Table-1 and Table-2 of the Eighth Schedule. These exemptions include the supply of electricity to AJK, import of gold under the entrustment scheme (SRO 760(1)/2013), import of cystagon, cysta drops, and trientine capsules (for personal use only), bovine semen (PCT heading 0511.1000), and import of all goods received as gifts and relief consignments in the event of a natural disaster or other catastrophe.
Additionally, exemptions apply to any goods received as gifts or donations from a foreign government or organization by the Federal or Provincial Governments or any public sector organization, subject to certain conditions. Other exempted items include POL products, milk (excluding those sold under a brand name or supplied by corporate dairy farms), and iron and steel scrap (excluding that supplied by manufacturer-cum-exporters of recycled copper, authorized under the Export Facilitation Scheme, 2021).
These comprehensive changes underscore the FBR’s ongoing efforts to enhance tax compliance, broaden the tax base, and ensure economic stability and growth.
