Finance Revenue and Economic Affairs rejects proposals to impose a 17 percent sales tax

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Senate Standing Finance Committee on Finance Revenue and Economic Affairs rejects proposals to impose a 17 per cent sales tax on items

The Senate Standing Finance Committee on Finance Revenue and Economic Affairs rejects proposals to impose a 17 per cent sales tax on items including precious jewellery, formula milk, bicycle and contraceptives.

The development came during a meeting of the parliamentary panel held here on Thursday under the chair of Senator Talha Mahmood to finalise recommendations in the Finance (Supplementary) Bill, 2021.

According to details, the current sales on gold and diamond is 1.5% and 2%, while 3% sales tax is charged on making the gold articles whereas the finance supplementary bill suggests to slap a 17% sales tax on gold, diamond, articles of finished jewellery or parts of other precious metals used in making precious jewellery.

Meanwhile, the Progressive Jewellery Group (PJG) proposed to impose a 10% sales tax on making gold articles instead of the 17% proposed by FBR as both gold and diamonds smuggled into Pakistan. However, the association lamented that Pakistan does not have a gold import policy and tax system.

A official of the Commerce Ministry told the committee that there are lacunas in the law and that no one can easily import gold due to tough conditions on foreign exchange.

The committee members while expressing skepticism about the association’s claims that 80 tonnes of gold are smuggled into the country annually. “What is the FBR doing to stop this smuggling?” Senator Farooq H Naek asked.

Member Policy FBR informed the committee that 160 tonnes of gold are used annually in Pakistan while the gold market in the country is around Rs2.2 trillion. “Only Rs29 billion of gold market is declared while out of a total of 36,000 goldsmiths, only 54 pay taxes,” he informed.

The committee chairman said that he could not comprehend the analogy behind the proposed amendment which will result in encouraging the undocumented business industry.

The committee noted that the proposed amendment is highly discriminatory as will only affect registered companies.

Similarly, the committee disposed of a petition by the match box industry on the proposed amendment of an exemption of tax on matchboxes with the directive to retain the previous regime of sales tax on the industry with the aim of securing the documented industry and increasing revenue in the interest of the state.

The committee also unanimously rejected the proposed 17% sales tax on formula milk and other products of common good, stating that a tax affecting the growth and health of infants will bring shame to the country at the national level.

Speaking on the occasion, Senator Kamil Ali Agha stated that the Federal Board of Revenue (FBR) is a “malicious entity”. “It collects Rs450 billion annually through various taxation regimes”, he lamented.

The chairman committee showed his intent to form a committee to examine the work of tax collectors and inspectors and where they get millions of rupees from despite having much low salaries.

Furthermore, a representative of DRAP informed that as discussed in the previous meeting, prices of registered drugs will not be increased according to the new GST regime. The authority informed that the drugs of therapeutic value prices will not be increased; however those of nutritional value will be charged with a 17% sales tax.

The committee observed that solar panels have also been taxed at 17%, while taxes are also being levied on imported bicycles. It proposed to impose the tax only on bicycles above Rs25,000.

Member FBR informed the committee that the tax department has also proposed to impose a 17% duty on goods for donation to hospitals, educational institutions, and other entities. On this, Senator Sherry Rehman said that people will stop making donating to these places which function for public welfare.

The Finance committee rejects the proposal, stating that donors would become reluctant to donate if they have to pay tax for doing a good deed.

Likewise, the Finance committee also rejects the proposal to impose a sales tax on contraceptive drugs which were exempted from tax in previous finance bills.

It may be mentioned here that the parliamentary panel gave a clause wise reading of the money bill and thoroughly debated on each point in the larger interest of the general public, reserving discussion on several clauses, demanding that data and statistics be provided on the revenue generated in the previous regime so that it can be studied minutely to understand the rationale behind the proposed amendments.

It was unanimously agreed that the government should give an assurance on whether or not the recommendations will be acknowledged so that futile countless hours are not spent debating on a matter which will not yield progressive results.

“If the financial adviser and his team are not present then who will we forward our recommendations to?” Musadiq Malik stated.

The chairman committee assured the members that he had urged Finance Minister Shaukat Tarin to accept the recommendations in letter and spirit, besides expressing that the integrity of the committee may be maintained and the presence of the minister, the secretary and other high-level officials may be observed.

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