The government will announce in FY2014-15 budget on Tuesday (June 3) the imposition of a 5 percent sales tax on a wide range of goods including import and supply of plant/machinery (not manufactured locally); cool chain machinery and equipment and machinery/equipment for development of grain handling/storage facilities and 17 percent sales tax on machinery/equipment and other capital goods for service sectors and capital goods imported for establishing wholesale/retail chain stores and other items.
Sources told Business Recorder here on Sunday that the standard rate of 17 percent sales tax would remain the same in 2014-15. However, the government would impose a special 5 percent sales tax on many items in budget 2014-15. A number of items specified in SROs to be rescinded would be subjected to 5 percent lower rate of sales tax. The sales tax exemption on all socially sensitive goods and sectors would be retained by transferring such items from SROs to the Sixth Schedule (Exemption) to the Sales Tax Act, 1990. Other zero-rated items under SROs would be transferred to the Fifth Schedule (Zero-rating) of the Sales Tax Act.
The government would convert federal excise duty (FED) of Rs 400 per metric ton on cement to 5 percent ad valorem on retail price basis.
Some of the items to be subjected to 5 percent minimum sales tax are plant and machinery not manufactured locally subject to certain conditions. The low rate of 5 percent sales tax would be charged on items imported by call centres, business processing outsourcing facilities duly approved by Telecommunication Authority; machinery, equipment, materials, capital goods, specialised vehicles (4×4 non luxury) ie single or double cabin pickups, accessories, spares, chemicals and consumables meant for mineral exploration phase; complete plants for relocated industries; machinery, equipment and other capital goods meant for initial installation, balancing, modernisation, replacement or expansion of oil refining petrochemical and petrochemical downstream products including fibres and heavy chemical industry, cryogenic facility for ethylene storage and handling and proprietary Formwork System for building/structures of a height of 100 ft and above and its various items/ components.
The sales tax exemptions, reduced rates and concessions would be withdraw on the import and supply of machinery, equipment and other items required for setting up, up-gradation and expansion of hotels (3 stars and above), tourism; sporting and other recreation services related projects as approved by the Ministry of Tourism; machinery, equipment and other capital goods for Service Sectors; machinery, equipment and capital goods imported for establishing wholesale/retail chain stores; Air Handling Units; items imported by the manufacturing sector like heat ventilation air conditioner; certain kind of machinery and equipment relating to broadcasting and machinery and equipment imported by surgical industry.
The existing lower rates of sales tax would not be changed on machinery and equipment for initial installation, balancing, modernisation, replacement or expansion of desalination plants, coal firing system, gas processing plants and oil and gas field prospecting; machinery, equipment, apparatus, and medical, surgical, dental and veterinary furniture, materials, fixtures and fittings imported by hospitals and medical or diagnostic institutes; machinery, equipment, materials, capital goods, specialised vehicles (4×4 non luxury) for mine construction phase or extraction phase; coal mining machinery, equipment, spares including vehicles for site use imported for Thar Coal Field; machinery, equipment and spares meant for initial installation, balancing, modernisation, replacement or expansion of projects for power generation through oil, gas, coal, wind and wave energy; machinery, equipment and spares meant for initial installation, balancing, modernisation, replacement or expansion of projects for power generation; machinery, equipment and spares meant for initial installation, balancing, modernisation, replacement or expansion of projects for power generation; machinery and equipment meant for power transmission and grid stations including under construction projects; machinery, equipment and other education and research related items imported by technical, training institutes, research institutes, schools, colleges and universities; machinery, equipment, raw materials, components and other capital goods for use in buildings, fittings, repairing or refitting of ships, boats or floating structures imported by Karachi Shipyard and Engineering Works Limited; machinery and equipment for marble, granite and gem stone extraction and processing industries; machinery, equipment and other project related items including capital goods, for setting up of hotels, power generation plants, water treatment plants and other infrastructure related projects located in an area of 30 km around the zero point in Gwadar; effluent treatment plants; items with dedicated use of 9[renewable source of energy like solar, wind, geothermal; items for promotion of renewable energy technologies and plant, machinery, equipment and specific items used in production of bio-diesel.