Federal Board of Revenue (FBR) and government announced through notification that goods on which sales tax shall — subject to conditions stated in this notification – be charged at the rate of zero per cent on the supply and import. Depending on the case a reduced rate of six per cent or four per cent – as specified in the said conditions of 128 imported material items – would be applied.
Previously, sales tax for export oriented sectors on around 184 items was being charged zero per cent at import stage and at four per cent and six per cent on local stage supplies for export oriented sectors as mentioned in SRO 283 dated 1st April 2011
Through SRO 1012, dated 4th November, the above scheme was revamped and items were reduced from 184 to 126. And sales tax charging made zero rated on import of items by export oriented sectors and single reduced rate of five per cent was made applicable on local supplies among these sectors.
Now, this zero rating scheme further revamped through SRO dated 23rd November 2011. Sales tax with zero per cent charge on import of 128 items by export oriented sectors and reduced rate of four per cent and six per cent would be applicable on local supplies among these sectors.
Facility of zero-rating shall be available to every such person engaged in manufacturing or trading in textile sector (including carpets and jute) who is registered for the purpose of sales tax other than retailer. No tax shall be payable at any stage of the supply chain if goods are sold by a registered person to a registered person till the stage of processing where sales tax shall be charged as specified hereunder.
The benefit of this notification shall be available to registered importers, traders, manufactures and exporters. In case where a commercial importer sells any imported goods to unregistered person, he shall charge and pay sale tax at six per cent of value of supply, if goods are usable in textile sector up to the stage of spinning including the product of spinning such as yarn and its by-products, where after such importer shall charge and pay sales tax at four per cent of value of supply.
No sales tax shall be payable at ginning or man-made and synthetic fiber manufacturing stage. In case of registered manufacturers importing their inputs or acquiring their inputs from commercial importers or registered manufacturers such manufacturers shall charge and pay sales tax at six per cent of value of supply only at the spinning stage, i.e. yarn and its by-products if these goods are supplied to any unregistered person provided that if such goods relate to stages after spinning, sales tax shall be charged and paid at four per cent of the value of supply.
In case of yarn purchases on payment of sales tax at six per cent of value of supply from spinning mills by unregistered persons i.e. traders or persons engaged in activities like sizing, warping, weaving, intermediary and other ancillary processes. Before processing of finished fabric, no further amount of sales tax shall be charged or demanded.
In case of registered persons engaged in providing processing services of any kind in respect of textile goods, such person shall charge from the person, who owns the goods but is not a registered person, sales tax at four per cent of service charges.
In case of stages after weaving, if the fabric is sold by a registered manufacturer to an unregistered person, sales tax shall be charged at four per cent of value of supply, if such manufacturer has availed zero-rate facility at previous stages of the production chain.
At the stage of processing or finishing of any kind of fabric or stitching of such fabric, if any registered person supplies the goods including finished products like finished, dyed/processed/printed fabric, textile apparel, home textile and clothing including garments and all non-woven products etc to an unregistered buyer, he shall charge and pay sales tax at four per cent of the value of supply.
Registered persons who have acquired goods at zero-rate under this notification shall pay sales tax at four per cent of value of supply on their supplies of all kinds of finished products to retailers, regardless of registration of such retailers.