PTI govt rules out turnover tax exemption for USC

Utility Stores Corporation will, however, be further subsidised to keep prices stable

ISLAMABAD: The federal government has declared it legally and administratively impossible to exempt the Utility Stores Corporation of Pakistan (USC) from the 1.5 per cent turnover tax while the Federal Board of Revenue (FBR) has said it could legally be exempted from the tax only through a bill tabled at the time of the budget.

However, the federal government has approved a Rs1 billion subsidy for the USC to eliminate the impact of the turnover tax on the prices of essential items.

According to documents received by The Express Tribune, the USC has raised the turnover tax exemption issue in the past several as well as the present meeting of the federal cabinet. The cabinet has also been briefed on the implementation plan and the subsidy disbursement process of Phases one and three of the prime minister’s relief package under which, it was told, five million Insaf Family Sahulat Cards will be issued in 2020 to ensure delivery of the subsidy to those eligible.

The documents further state that the USC has been submitting Rs4 to 5 billion annually in sales tax and turnover tax and that it was suggested in the federal cabinet meeting that it be exempted from payment of the turnover tax to bring about a further reduction in the prices of essential goods at utility stores, upon which cabinet members, while recognizing utility stores’ role in the availability of goods at economical rates, said that exempting the USC from taxation would not be legally and administratively possible.

According to the documents, the Finance Division gave the assurance in the meeting that the subsidy to the USC could be increased if necessary.

The document further states that the cabinet had approved a grant of Rs1 billion in additional subsidy to the USC to reduce the impact of the turnover tax on prices of essential items.

The meeting was also told that the corporation was being restructured after the appointment of a new USC Board of Directors in 2019 and a Managing Director in May 2019 and that, under the new management, USC sales had increased threefold while its margin had increased from 8.67 per cent to 9.15 per cent.

Similarly, its amount payable to vendors had also been reduced from Rs8 billion to Rs5 billion.