The textile industry has received no notification from the Federal Board of Revenue (FBR) regarding no exemption/exclusion from further tax to the zero-rated supplies covered under the SRO1125(I)/2011, said the industry sources.
They said the Association of the textile industry has received no such notification so far. Meanwhile, the Association sources said they were receiving repeated calls from the member mills regarding the notification so that they could start charging sales tax from their customers.
Sources close to the industry leadership said a meeting is likely to take place between them and the Board soon where the issue would be taken up for further deliberations. They said they had advised the Board in the budget proposals that the further tax should be reduced to one percent with a permission to adjust it. However, the budget documents of the government was silent over the proposal in the SRO.491(I)/2016 allowing zero-rating of sale tax to five export oriented sectors.
The media reports had suggested that the FBR has conveyed to the textile sector that no exemption/exclusion from further tax is available to the zero-rated supplies covered under the SRO.1125(I)/2011 as supplies to un-registered persons involves risk of local consumption. The FBR has issued FBR’s position/viewpoint to the textile sector on the anomalies in
According to the FBR, further tax on supplies subject to zero-rate under SRO 1125(1)/2011 dated 31.12.2011. All the supplies to unregistered persons are subject to further tax at 2% under section 3(1A) of the Sales Tax Act, 1990, except those specified in SRO 648(1)/2013 dated 09.07.2013. Since zero-rated supplies are not mentioned in the said SRO, therefore, no exemption/ exclusion from further tax is available to zero-rated supplies covered under SRO 1125(1)/2011 dated 31.12.2011. Further, the supplies to unregistered persons involve a risk that the same may end in local consumption, therefore, there is no justification in allowing exemption from further tax on such zero-rated supplies.