Pakistan’s Federal Board of Revenue (FBR) has indicated that it will soon issue a Statutory Regulatory Order (SRO) to impose two percent sales tax at every stage of the textile sector.
The FBR will also introduce a maximum 0.5 percent cap on sales tax refund on packing material used by the textile industry, FBR chairman Ali Arshad Hakeem said at a workshop on ‘Accelerating Tax Reforms’.
The two percent sales tax on the textile sector will, in effect, mean abolishing the zero-rate regime, Mr. Hakeem said during the discussion of the ‘Tax Policy Group’ at the international workshop.
He informed the Group, at the two-day workshop jointly organized by the World Bank and FBR, that the existing sales tax exemptions and zero-ratings would be withdrawn systematically, as it cannot be dismantled in one go.
He said the various industrial sectors in Pakistan enjoying tax exemptions and zero-rating know that such exemptions cannot last forever. The introduction of two percent sales tax on textile sector is a step to curtail tax exemptions in the country, he added.
The discussion of ‘Tax Policy Group’ centred on four key issues – the tax policy should be aimed at ensuring revenue adequacy; it should be fair, uniform and equitable; promote economic efficiency; and consistent while enabling simplification of tax structure.