25% Sales Tax not Applicable on Locally Manufactured Mobiles: FBR

There is no change in the sales tax regime of locally manufactured mobile phones and imported mobile phones valued less than $200.

The Federal Board of Revenue (FBR) on Tuesday issued circular 1 of 2023 to explain important amendments introduced in Sales Tax Act, 1990 (STA) and Federal Excise Act, 2005 (FEA) through Finance (Supplementary) Act, 2023.

In the Eighth Schedule, S. No. 47 and 56 of Table-1 have been aligned with the increase in the standard rate of sales tax. Similarly, imported cellular/mobile phones (CBU) valued at $200 and above were chargeable to 17 percent under Table-2 of the Ninth Schedule. The Schedule ibid has now been rationalized in line with the enhancement in the standard rate of sales tax and the considered decision to introduce a special rate of 25 percent for certain luxury goods.

It is pertinent to point out that there is no change in the sales tax regime of locally manufactured mobile phones and imported mobile phones valued less than $200 which shall be continued to be chargeable as per the relevant provision of Table-2 of the Ninth Schedule, FBR added.

Sugary drinks

The Federal Board of Revenue (FBR) has imposed a 10 percent federal excise duty on sugary fruit juices, syrups, squashes, and waters whether or not containing added sugar or artificial sweeteners excluding mineral and aerated water. The rate of federal excise duty on all types of aerated water has been increased from 13 percent to 20 percent, FBR said.

In order to reduce the fiscal gap and increase the tax-to-GDP ratio, the standard rate of sales tax has been increased from 17 percent to 18 percent.

In line with the provision of section 3(2)(b) of STA, the Federal Government has been empowered to enhance the rate of sales tax with respect to goods falling in the purview of the Third Schedule, through the insertion of a new proviso in clause (a) of sub-section (2) of section 3 of the STA.

The rate of federal excise duty on cigarettes under S. No. 9 and 10 of Table-1 of the First Schedule to the FEA has been increased through the Finance (Supplementary) Act, 2023. The threshold of minimum price has also been enhanced by means of amendment in “Restriction-3-Minimum Price”. Furthermore, in order to secure revenue and ensure that no cigarette brands become liable to lesser FED as a result of changes in the price threshold, a new condition “Rate of Duty” has been added after the Table-1 in First Schedule to FEA.

FED on cement

The rate of FED on cement was Rs. 2 per kg which was reduced to Rs. 1.50 per kg as part of the relief measure in the wake of the COVID-19 pandemic through the Finance Act, 2020. In order to bring at par with the rate prevailing prior to 1st July 2020, the rate of FED on cement has been increased to Rs. 2 per kg, FBR added.

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