On bulk deliveries of items manufactured under brand names or trademarks, such as red chilies, ginger, turmeric, yogurt, butter, desi ghee, and cheese, the Federal Board of Revenue (FBR) will levy an 18% sales tax.
Revised Sales Tax Under Finance Act 2023
The FBR has published Circular No. 02 of 2023 explaining the changes made by the Finance Act of 2023 to the Federal Excise Act of 2005, the ICT (Tax on Services) Ordinance, and the Sales Tax Act of 1990.
Prior to Finance Act 2023, sales tax was applied to imports and local supplies of specific consumable goods when they were sold in retail packaging with brand names and trademarks.
Although such “bulk” supplies was nonetheless sold under a brand name or trademark, some of these goods were nonetheless classed as “bulk” packaging and claimed to be exempt from sales tax.
The relevant entries under Tables 1 and 2 of the Sixth Schedule have been appropriately updated to eliminate any misunderstanding by eliminating the distinction between “retail” and “bulk” packing types.
As a result, sales tax is now applicable to all supplies of the goods listed that are created using brand names or trademarks.
Red chiles, ginger, turmeric, yogurt, butter, desi ghee, cheese, processed cheese that isn’t shredded or powdered, sheep, goat, and raw poultry, fish, and crustacean meat are among these things, according to FBR.
Prior to Finance Act, 2023, supplies of goods made by retail establishments integrated with the Board’s real-time reporting system dealing in finished fabrics and locally produced finished textile leather and artificial leather articles, etc., were subject to a reduced sales tax rate of 12 percent (under the condition that they had maintained 4 percent value addition during the previous six months).
The aforementioned decreased rate has been increased to 15% by the Finance Act of 2023.
On taxable items supplied by a registered person to a person who has not gotten a sales tax registration number or who has obtained a registration number but is not an active taxpayer, additional tax is imposed.
Under sub-part (1A) of section 3 of the Sales Tax Act (STA), the aforementioned sales tax rate was once 3 percent but has since been increased to 4 percent by the Finance Act of 2023.
Prior to the Finance Act of 2023, infant-friendly preparations sold for retail for no more than Rs. 500 per 200 grams received zero-rating. The new barrier is Rs. 600 for every 200 grams.
According to the FBR, wheat bran is a by-product created when milling wheat to make wheat flour. Bran has always been exempt, with the exception of the time when the notification of the exemption expired on June 30, 2018.
The already existing exception for wheat Bran has been amended to include the interim time and the addition that this exemption will take effect on July 1st, 2018.
By inserting the word “commodities” under S. No. 21 of the Fifth Schedule to the Sales Tax Act (STA), the scope of the zero-rating facility on local supplies of raw materials, components, parts, and plant and machinery to the registered exporters authorized under the Export Facilitation Scheme, 2021 notified by the Board with such conditions, limitations, and restrictions as specified therein is increased.
The category of covered space for Tier-1 merchants has been eliminated to give businesses with a level playing field. FBR claimed that the clause (43A) of section 2’s subclauses (e) and (ga), which specify that furniture shops must have a shop size of 2,000 square feet, other retailers must have 1,000 square feet, and jewelers must have 300 square feet, are missing.
In order to enforce the National Tax Council’s (NTC) decision, the Finance Act of 2023 imposes a tax on electric power transmission services at a rate of 15% within the territorial authority of ICT. This is done by adding S. No. 60 to Table-1 of the Schedule.
To read our blog on “FBR did comprehensive changes in export facilitation scheme,” click here.
