Within third month of passage of Finance Act, 2021, the Government felt the need of introducing amendments in the Tax Laws. These amendments are primarily directed towards broadening of tax base besides providing concessions to certain sectors.
Tax Incentives / exemptions / reduced rate of sales tax have been provided for the following sectors:
- Zero rating of sales tax for fat filled milk sold in retail packing under a brand name or trademark.
- Sales tax exemption on import of credit / debit cards terminals and retailer cash register.
- Import of electric vehicle in CBU condition will be subject to 5% sales tax.
- Reduced rate of withholding tax and minimum tax on turnover for distributors, retailers etc. of steel sector at 0.25% besides reducing sales tax rate to 14% for import of re-meltable scrap if imported by steel melters.
- Minimum tax on turnover will not apply to mobile phone manufacturers engaged in the local manufacturing of mobile phone devices.
1) The exemption from sales tax on imports of edible fruits whether fresh, frozen or otherwise preserved but excluding those bottled or canned is now also being extended to the fruits imported from Afghanistan.
2) The exemption from levy of sales tax on import of auto disable syringes and certain specified raw materials used for their manufacturing expired on June 30, 2021. Such exemption is now being extended upto December 31, 2021. Furthermore, exemption is being allowed on certain specified raw materials imported by registered manufacturers of auto disabled syringes with quota determined by IOCO and subject to NOC from Ministry of National Health Services Regulation and Coordination.
3) The Finance Act, 2021 exempted the import of POS machines for installation on retail outlets as are integrated with the FBR‘s system for real-time reporting of sales. Such exemption is now also being extended to import of credit / debit card terminals and retailer cash registers.
Reduced rate of sales tax
1) A reduced rate of 14% is being specified for import of re-meltable scrap if imported by steel melters.
2) Import of electric vehicle in CBU condition will be subject to 5% sales tax.
3) A special rate of 16.9% will apply on business to business transactions to be specified by the FBR through a notification subject to the condition that payment is made through digital mode.
Zero rating of fat filled milk
The Finance Act, 2021 included fat filled milk (excluding that sold in retail packing under a brand name or trademark) within the list of items subjected to zero rating under the Fifth Schedule. Furthermore, a reduced rate of 10% was prescribed for sale of fat filled milk sold in retail packing under a brand name or trademark.
Through an amendment, this zero rating facility is now also extended to fat filled milk sold in retail packing under a brand name or trade mark, which was earlier being taxed at reduced rate of 10%.
Minimum tax waiver for Mobile phone manufacturers
Minimum tax on turnover under section 113 will not apply to mobile phone manufacturers engaged in the local manufacturing of mobile phone devices.
Rate of tax for Distributors & retailers of Steel Sector
The facility of reduced rate of withholding tax and minimum tax on turnover at 0.25% in case of distributors & retailers, etc. appearing on ATL of income tax and sales tac currently available to certain sectors has also now been extended to Steel sector.