The Federal Board of Revenue (FBR) revealed on Thursday that the share of sales tax on imports remained 56.4 percent while domestic sales tax contributed 43.6 percent to the total sales tax collection during 2020-21.
In its biannual review, the FBR has recommended measures to enhance the domestic share of sales tax collection for greater stability in revenue collection growth.
According to FBR, the net collection of domestic sales tax was Rs. 863.2 billion against Rs. 720.5 billion in the previous fiscal year and the net collection grew by 19.8 percent. In absolute terms, Rs. 142.6 billion higher revenue has been collected in FY 2020-21 as compared to the last fiscal year. The collection in the first half recorded a growth of 6.6 percent, which increased to 44.4 percent in the second half of the financial year.
A major chunk of the collection of domestic sales tax, accounting for around 77 percent of the total collection under the head, comes from petroleum products, electrical energy, sugar, cotton yarn, cement, cigarettes, food products, and aerated water/beverage, etc. Again, the FBR says, the narrow base of sales tax collection due to greater reliance on a few items needs policy intervention. It adds that the policy, operations, and broadening the tax base (BTB) wings of FBR need to review the existing base and to devise measures for expanding the sales tax for sustaining the current spike in the revenue collection.
The FBR’s data revealed that petroleum products, the top revenue-generating source with a 34.9 percent share, recorded 30.1 percent growth during 2020-21. Tax from electrical energy also grew by 38.6 percent with sugar by 57.8 percent, cotton yarn by 71.2, and cigarettes by 37.2 percent.
The share of sales tax from imports in total sales tax net collection reached around 57 percent during 2020-21. The net collection of sales tax on imports during 2020-21 stood at Rs. 1,118.2 billion against Rs. 876.3 billion in FY 2019-20, registering a growth of 27.6 percent.
Among the 10 major revenue spinners in terms of sales tax at the import stage (contributing 73.7 percent of total STM collection), more than 50 percent of STM is contributed by POL products (Ch:27), iron and steel (Ch:72), vehicles (Ch:87), (machinery (Ch:84 & 85), and edible oil (Ch:15).
Like domestic sales tax, petroleum is the leading source of sales tax collection at the import stage. Its share in total sales tax imports is around 23 percent. During FY 2020-21, collection from POL products was Rs. 255.7 billion against Rs. 231.3 billion in FY 2019-20, reflecting a growth of 10.6 percent, according to FBR.