The Federal Board of Revenue (FBR) has released the revised Sales Tax Act 1990 and Federal Excise Act, encompassing the amendments introduced through the Finance Act 2023.
One significant provision in the amended Sales Tax Act is the imposition of an additional tax of 4 percent on taxable supplies made to individuals without a registration number or those who are not active taxpayers. This measure aims to encourage registration and compliance with tax obligations.
Furthermore, the updated Sales Tax Act establishes the Directorate General of Digital Initiatives, comprising a Director General and various other officers, appointed by the Board through an official Gazette notification.
Another important addition to the law is the detailed procedure for Alternative Dispute Resolution, providing a structured mechanism for resolving tax-related disputes outside the traditional litigation process.
In terms of enforcement, the amended Act specifies that individuals involved in the manufacturing, possession, transportation, distribution, storage, or sale of specified goods without proper tax stamps, banderoles, stickers, labels, or barcodes may face outright confiscation of the goods.
Regarding tax exemptions and zero-rating provisions, the review of the updated Act reveals several clarifications. Sales tax zero-rating will be applicable to imports or supplies made by, for, or to a qualified investment specified under the Foreign Investment (Promotion and Protection) Act 2022, as outlined in the First Schedule and the Second Schedule of the Act.
Moreover, the Act clarifies that blood transfusion sets not packed in aluminum foil, imported with blood bags CPDA-1 in corresponding quantity in the same consignment, will also be exempt from sales tax, removing any ambiguity on the matter.
Additionally, the sales tax exemption will be available on supplies and imports of plant, machinery, and equipment for installation in tribal areas, as defined in the Constitution, until June 30, 2024. Industries located in tribal areas will also benefit from the exemption on industrial inputs.
Furthermore, the updated Act extends sales tax exemption on the supplies of electricity to residential and commercial consumers in tribal areas and to industries that were established and commenced production before May 31, 2018, excluding certain sectors. This exemption will be valid until June 30, 2024.
The revised Sales Tax Act also introduces a one percent sales tax on registered drugs under the Drugs Act 1976 and medicaments classified under chapter 30 of the First Schedule to the Customs Act 1969. However, certain items such as infusion solution bags, scrubs, detergents, surgical tapes, disinfectants, and cosmetics will be exempt from this tax.
Additionally, a one percent sales tax will be applicable to raw materials used for the basic manufacture of pharmaceutical active ingredients and pharmaceutical products. Importers of raw materials may be eligible for a reduced tax rate based on the customs duty imposed on the specific items.
It is important to note that the aforementioned amendments and provisions were incorporated into the Sales Tax Act 1990 and Federal Excise Act up to June 30, 2023. These updates aim to streamline tax procedures, encourage compliance, and provide clarity on taxation matters.
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