The Federal Board of Revenue (FBR) on Saturday said that one percent further tax has only been imposed on supplies of zero-rated sales tax to unregistered persons.

Rehmatullah Khan Wazir, Member Inland Revenue (Operations) told The News that further tax has been aimed at documenting the transactions in the economy.

Through the Finance Bill 2017, it was proposed to levy two percent further tax on the supplies made by five export-oriented sectors to unregistered persons. However, on the protest of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and All Pakistan Textile Mills Association (Aptma), the rate of further tax has been reduced to one percent, which will be implemented from July 1, 2017.

The business community has objected imposition of further tax and said that it is injustice to levy such charges on those class of persons, who were already granted zero-rated status.

They also argued it would increase their cost of production because unregistered persons are least bothered to pay further tax.

Wazir rejected such objections and said that further sales tax is an indirect tax and registered persons are required to add this rate of tax to invoice issued on the supplies to unregistered persons.

He also said that one percent further tax is only for the zero-rated supplies, while all other supplies will have the rate of two percent.

Shakeel Dhingrah, chairman of the FPCCI Committee on FBR, termed the levy of further tax counterproductive to concessions granted to five export-oriented sectors.

Under SRO 1125 (I) / 2011, the government has allowed zero-rated sales tax on the supplies made by five export-oriented sectors to registered or unregistered persons falling within these sectors, he added.

He; however, said the supplies to unregistered persons are subject to verification that supplies made to five export sectors.

“In case a registered person is unable to prove that the sales made to unregistered persons belonged to the exports sector, the FBR impose 17 percent sales tax instead of zero-percent,” he added.

Similar situation would be with the further tax as registered persons would be in difficult position to verify their supplies, he said.

Tax experts said higher courts have rejected the FBR plea on further tax on zero-rated supplies, observing that when the tax is zero percent than how authorities could impose further tax.

The experts said in order to override the court orders, amendments have been introduced through the finance bill to give legal cover to the implementation of further sales tax.

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