Taxes imposed, increased on kitchen items

Cost of living to rise due to new levies; FBR issues notification

KARACHI: The cost of living is all set to surge in the days to come as the government has notified an increase in the rate of taxes and/or imposed new taxes on kitchen items like cooking oil and ghee, sugar, packed milk, all imported goods, construction material and household electrical and electronic items.

It has also increased or imposed taxes on packed biscuits, soft drinks, cotton ginning, ship-breaking meant for reproducing steel and import of semi-raw material for finished steel goods, cement, motorcycles, auto rickshaws and auto parts.

“Zero-rating shall not apply to export of goods specified in the SRO as made by air or land route to Afghanistan and through Afghanistan to Central Asian Republics (CARs),” the Federal Board of Revenue (FBR) notified through a circular titled “Finance Act 2019 - Explanation of Important Amendments in Sales Tax Act, 1990, Federal Excise Act, 2005 and Islamabad Capital Territory (Tax on Services) Ordinance, 2001,” dated July 26, 2019.



It, however, declared hospitals exempt from 17% sales tax on utilisation of energy like electricity and gas and reduced the rate of sales tax to 7.5% on bakery items.

On the other hand, it has allowed tax exemption on the import of industrial inputs including plant and machinery imported by units within tribal areas; rationalised sales tax on the import of mobile phones and rationalised federal excise duty (FED) on cigarettes and motor cars.

The increase in the rate of taxes and/or imposition of 17% sales tax and FED on new items is aimed at collecting Rs5.55 trillion in taxes, which is around 40% higher than the collection in the preceding fiscal year ended June 30, 2019.

The move, however, will trigger a new wave of inflation in the country and the inflation rate may go into double digits soon.

“Powers of federal government to grant zero-rating curtailed and Board’s (FBR) similar powers withdrawn,” said the notification.

“The rate of FED on ghee and cooking/edible oils has been enhanced to 17% (from 16% previously). In case of products in retail packing, FED shall be payable on the basis of retail price.”

Moreover, 17% sales tax will be charged on rapeseed, sunflower seed and canola seed. Sales tax on soybean seed has been enhanced from 6% to 10% in order to equate the rate with that on soybean meal.

White crystalline sugar is now subject to 17% sales tax. Packed and branded fat-filled milk shall now be subjected to 10% sales tax. The rate of sales tax on concentrated milk (including powdered milk), unsweetened and unflavoured, has however been reduced to 10% if sold in retail packaging under a brand name.

Locally manufactured goods specified in the Third Schedule of Sales Tax Act are already subject to sales tax on the basis of retail price.

“Now, through an amendment to Section 3(2)(a), the retail price taxation has also been made applicable to imported goods,” it said.

Importers are required to print the retail price. Such goods shall be assessed on the basis of declared retail price and not on the basis of customs value.

However, in view of difficulties at the import stage, customs authorities have been asked to clear the consignments for July 2019 without retail price stickers through STGO 102/2019 dated July 15, 2019.

However, from August 1, 2019, “the imported items under the Third Schedule shall be cleared provided that the retail price along with the amount of sales tax is legibly, prominently and indelibly printed or embossed on each article, packet, container, package, cover or label as the case may be,” it said.

Besides, the government has imposed sales tax on a number of household electrical and electronic items, including air conditioners, refrigerators, electric fans, washing machines, ovens, geysers, spring mattresses, foam products, paints, storage batteries, tubes and tyres, and tiles.

Besides, FED on aerated waters (carbonated drinks) has been enhanced to 13% from 11.5% of the retail price.



Exemption will not be available on ginned cotton as the same has been subject to reduced 10% rate of sales tax. Vessels imported for breaking up are now taxable at the rate of 17%. FED of Rs1.50 per kg levied on cement has been enhanced to Rs2 per kg.

Penalty on non-filing or late filing of sales tax returns, excluding cases where delay is less than ten days…has been enhanced to Rs10,000, it said.

However, gold and silver are now chargeable at the reduced sales tax rate of 1%. They have also been excluded from the purview of minimum value-addition tax of 3% at the import stage.

Previously under special procedures, the jewellery supplied by local jewellers was taxed at 17% of the making charges only. Now, articles of jewellery, or parts thereof, of precious metal or of metal clad with precious metal, will be subject to sales tax at 1.5% of the value of gold, plus 0.5% of the value of diamond used therein, plus 3% of making charges.

Published in The Express Tribune, July 28^th, 2019.

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