ISLAMABAD: Federal Board of Revenue (FBR) Chairman Dr Muhammad Ashfaq Ahmed has said that tax reforms undertaken by the government are most significant in the history of the country.
Addressing a press conference on Friday, he said that the government is taking steps to stop distortions in the tax system. He said that some of the facts of the supplementary finance bill have been misinterpreted by the media.
He said that many taxes that were claimed to have been levied were not actually imposed by the government. Likewise the taxes that were shifted from one place to another were also misinterpreted, he said, adding some changes were made to amend certain laws relating to taxes and duties through the Finance (Supplementary) Bill, 2021.
Explaining the salient features of the proposed Finance (Supplementary) Bill, 2021, he said that 17 percent general sales tax has not been imposed on commodities that are used by a common man. He said the government has withdrawn sales tax exemptions of Rs343 billion.
Dr Ashfaq said that Federal Excise Duty has been imposed on imported CBU (completely built up) vehicles which are of 1000cc. He said that FED on 1000cc to 1800cc vehicles has been increased from five percent to ten percent and 25-30 percent on 1800cc to 3000cc.
He clarified that commodities of daily use by common man such as food items, dairy products, clothing are being kept tax-free in the domestic market. Similarly, import and supply of rice, wheat, meslin, local supply of other grains, fruits, vegetables, beef, mutton, poultry, fish, eggs, sugar cane, beet sugar, and imported vegetable and fruits from Afghanistan are also retained as tax-free. Moreover, milk and fat-filled milk have also been kept as tax-free.
The FBR chairman highlighted that various items which might somehow attract adverse impact of tax reforms, had been identified for targeted subsidy. He said input adjustment would remain available to all taxable business inputs and assured expeditious sales tax refunds to business and industry on import of raw material and capital goods including pharmaceutical sector.
Dr Ashfaq explained that the pharmaceutical firms have been equated with exporters for purposes of release of refunds within 72 hours. Therefore, pharmaceutical firms would now be able to claim refunds on GST paid as input tax on packaging material, utilities etcetera which they previously could not with a price tag of Rs35 billion. Expectedly, the prices of medicines in the retail market should come down, approximately by 20 percent.
He highlighted the breakup of total withdrawn tax exemptions of Rs343 billion, saying that they could be broken into three main segments. These segments were pharmaceuticals with Rs160 billion, plant and machinery Rs112 billion, and goods Rs71 billion. It was clarified that Rs272 billion of above tax expenditure on account of machinery and pharmaceuticals are refundable or adjustable. Only Rs71 billion tax exemptions on goods are the net imposed tax and this tax included tax on luxury goods Rs31 billion and Rs31 billion on business goods.
Only a meagre amount of Rs2 billion was related to goods which may affect common man for which an elaborate targeted subsidy plan of Rs33 billion had been proposed to protect any segment of population which may get affected even indirectly by the withdrawal of some exemptions etcetera, he added.
He further clarified that advance tax on cellular services is proposed to be increased from 10 percent to 15 percent while withholding taxes are proposed on foreign produced TV serial and advertisements with foreign actors.
The chairman said these decisions would yield results within one or two years as the tax system would be drawn on the right track.
