The Federal Board of Revenue (FBR) will charge 18 percent sales tax on bulk supplies of goods made under brand names or trademarks including red chilies, ginger, turmeric, yogurt, butter, desi ghee and cheese etc.
The FBR has issued Circular No. 02 of 2023 on the explanation of Important Amendments in Sales Tax Act 1990, ICT (Tax on Services) Ordinance, 2001 and Federal Excise Act, 2005 Through the Finance Act, 2023.
Prior to Finance Act, 2023, imports and local supplies of certain edible goods when sold in retail packaging with brand names and trademarks were made chargeable to sales tax. However, as a result, certain quantity of such goods was treated as “bulk” packaging and were claimed as exempt from charging of sales tax although such “bulk” supply was still under a brand name/ trademark.
In order to remove the ambiguity, the relevant entries under the Table-1 and Table-2 of the Sixth Schedule has been suitably amended by removing the distinction between any types of packaging whether ‘retail’ or bulk.
As a result, all supplies of goods specified when made under brand names or trademarks are now chargeable to sales tax. These items include red chilies, ginger, turmeric, yogurt, butter, desi ghee, cheese, processed cheese not grated or powdered, products of meat or meat offal, meat of bovine animals, sheep, goat and uncooked poultry meat & fish and crustaceans, FBR said.
Prior to Finance Act, 2023, supplies of goods made by retail outlets integrated with the Board’s real time reporting system dealing in finished fabrics and locally manufactured finished articles of textile leather and artificial leather etc. (subject to the condition that they have maintained 4 percent value addition during the last six months) were chargeable at reduced sales tax rate of 12 percent. Through Finance Act, 2023, the said reduced rate has been enhanced to 15 percent.
Further tax is charged on supplies of taxable goods made by a registered person to a person who has not obtained sales tax registration number or has obtained registration number but not an active taxpayer. The said rate of sales tax under sub-section (1A) of section 3 of sales tax Act (STA) was previously 3 percent which has now been enhanced to 4 percent through Finance Act, 2023.
Prior to Finance Act, 2023, preparations suitable for infants, put up for retail sale not exceeding Rs. 500 per 200 grams enjoyed zero-rating. The threshold has now been increased to Rs.600 per 200 grams.
The FBR said that the wheat Bran is a by-product obtained during milling of wheat to produce wheat flour. Bran has always remained exempt, except some period when the exemption notification lapsed on 30.06.2018. An insertion has been made in the already available exemption to wheat Bran to cover the intervening period and expression has been added that this exemption shall apply from the 1st day of July, 2018.
The scope of zero-rating facility on local supplies of raw material, components, parts and plant and machinery to the registered exporters authorized under Export Facilitation Scheme, 2021 notified by the Board with such conditions, limitations and restriction as specified therein is enhanced by inserting the word “commodities” under S. No. 21 of Fifth Schedule to the Sales Tax Act (STA).
In order to provide level playing field to retailers, the category of covered area for Tier-1 retailers has been removed. The sub-clauses (e) and (ga) of clause (43A) of section 2 regarding the requirement of shop area i.e. 2,000 square feet for furniture retailers, 1,000 square feet for other retailers and 300 square feet for jewelers are omitted, FBR said.
Through Finance Act, 2023, tax on electric power transmission services is imposed @ 15 percent within the territorial jurisdiction of ICT through addition of S. No. 60 in the Table-1 of the Schedule to implement the decision of National Tax Council (NTC), FBR added.
