Govt Levies 18% Sales Tax on Raw Materials of Exporters
Exporters in Pakistan will be burdened with an 18% sales tax on their imported raw materials in the next budget. This will equalize the tax rate for imported material with the tax that has been levied on local raw material since last year. The Federal Board of Revenue (FBR) announced the decision.
The additional tax is part of sweeping reforms pushed by an IMF-supported policy. The policy demands that exporters pay a 1% minimum income tax on their overall revenues and a 29% standard income tax. The IMF has mandated Pakistan to maintain the 1% minimum tax for two to three years as it remains uncertain whether the standard tax regime is effective.
FBR member Dr. Najeeb Memon confirmed the information during a sitting of the National Assembly Standing Committee on Finance. He stated that the 1% minimum tax is non-refundable and has to be paid in addition to the 29% base tax.
The committee also considered the 18% sales tax imposed on locally used raw materials for export in the previous budget. The act is one of the ongoing tax reforms.
But the FBR’s lackadaisical attitude towards tax collection, criticized by Committee Chairman Syed Naveed Qamar, led to the delay in approval of the Income Tax Second Amendment Bill. The bill suggests the restoration of a 25% tax relief for full-time teachers and researchers from July 1, 2022, to the end of the tax year 2025. But medical doctors engaged in private practice are excluded from this relief.
