The Senate Standing Committee on Finance was informed on Friday by the Federal Board of Revenue (FBR) that a special SRO would be issued soon to grant 3.5 per cent reduction in taxes proposed in the federal budget for the next fiscal year.
The meeting of the committee was held under the chairmanship of Senator Ahmad Ali of MQM. Also attending the meeting were Syeda Sughra Imam of PPP and Muhammad Talha Mahmood of JUI-F.
FBR gave this commitment when the committee raised the issue that importers were reluctant to clear their consignments so they could avail the reduction in sales tax and special excise duty from July 01.
The government had announced reduction in sales tax from 17 to 16 per cent and also abolished 2.5 per cent special excise duty (SED) from next fiscal year. The non clearance of consignments has also resulted in reduction in the revenue collection of Rs277 billion during the last month making the tax collection target of Rs1588 billion for the current fiscal year highly unlikely.
Member Customs Mumtaz Haider Rizvi informed the committee that the Afghan traders would have to give financial guarantee of any of the AA rated insurance companies by the Pakistan Credit Rating Agency (PACRA). He said that the criteria was not company specific but rather based upon credit ratings.
When Senator Talha Mahmood asked what transit fee was paid by the Afghan traders and NATO, Rizvi said that at present there was no transit fee but they have proposed its imposition in the finance bill for the next fiscal year. He said the recommendation was given as customs had to invest heavily on scanners, equipment and IT infrastructure for curbing pilferage of Afghan transit goods.
He said after the start of transit trade under the Afghanistan Pakistan Transit Trade Agreement (APTTA), the containers would be scanned at the ports and their images would be electronically submitted at the exit points on Torkham and Chamman borders. If there was some distortion then the containers would be opened for physical verification. The necessary changes in customs act have been proposed.
The committee was also informed that other than the tax credit of five years for 100 per cent equity investment during the next fiscal year, the industrial units opting for balancing modernization and restructuring of their machinery on their own would also be eligible for tax credit for the amount spent. This could be availed in the next four years. About the reduction in tariff structure hurting the local industry, Chairman FBR informed the committee that the tariff related issues were being worked out by the Planning Commission and Ministry of Commerce. He said tariff policy would be an integral part of the upcoming trade policy.