The sales tax remained the top revenue generator in 2019-20 with a 40.0 percent share, followed by direct taxes with 38.1 percent, customs 15.7 percent, and federal excise duty (FED) 6.3 percent.
During FY 2019-20 the share of customs duty and FED has declined, whereas the share of direct taxes, FED and sales tax has increased slightly.
According to an FBR report released on Monday, the petroleum products remained the top revenue-generating source during 2019-20. The POL products were the top source of revenue of sales tax (import stage); sales tax domestic consumption and customs duty at the import stage during 2019-20.
The collection of sales tax domestic is concentrated in a few commodities. The major commodities are
- Petroleum products
- Electrical energy
- Textile sector
- Sugar
- Food products
- Cigarettes
- Cement
- Aerated water/beverage
- Iron & steel products
- Independent power projects
The above-mentioned commodities shared around 73.2% of sales tax domestic revenue.
The POL products, the top revenue-generating source, with a 32.6% share, has shown a negative trend of 5.6% during FY 2019-20. The collection of cement, iron & steel and IPPs also recorded negative growth during the period under review. On the other hand collection from textile, sugar and electrical energy recorded very healthy growth during FY 2019-20.
The top 10 commodities of sales tax import (STM) have contributed a major chunk i.e. 74.4% in STM collection. The detailed data indicates that more than 55% of STM is contributed by POL products, Iron and Steel (Ch:72), machinery (Ch:84 & 85), and plastic (Ch.39).
Like sales tax (domestic), petroleum is the leading source of sales tax collection at the import stage as well. Its share in sales tax imports is around 26.4%. During FY 2019-20 collection from POL products was Rs. 231.3 billion against Rs. 221.3 billion during FY 2018-19 reflecting a growth of 4.5%.
Around 58.3% of customs duty collection has been contributed by 10 major commodities grouped in PCT Chapters. Out of ten major items, POL products grew by 4.9%, electrical machinery by 41.7% and tea & coffee 22.5%. The reduction in imports has been the major cause of lower collection in the various heads. The POL products have become the top contributor of customs duty.
During 2019-20, the major revenue spinners in FED include cigarettes, cement and beverages. The purpose of imposing federal excise duties is not only to collect tax revenues but also to discourage the use of some unhealthy materials like cigarettes. In coordination with the health ministry, other unhealthy items could be identified for the purpose of levying the FED in the coming years to discourage their consumption, FBR report added.
The Withholding Taxes contributes a major chunk i.e. 72% to the total collection of income tax. The WHT collection during FY 2019-20 has been Rs. 1,091.5 billion against Rs. 960.2 billion indicating a growth of 13.7% (Table 8).
The ten major components of withholding taxes that contributed around 84% to the total WHT collection are:
- Contracts
- Imports
- Salary
- Telephone
- Dividends,
- Bank interest
- Cash withdrawal
- Electricity
- Exports
As far as growth is concerned, collection from telephone increased by around 218%, followed by bank interest (120.4%), salary 69.4%, electricity (27.8%), export (11.6%). During the same period collection from the heads of cash withdrawals, imports and dividends recorded negative growth.
