The reduction of subsidised sales tax rates on mobile phones is estimated to produce Rs. 27 billion for the Federal Board of Revenue (FBR) during the ongoing exercise of removing sales tax exemptions in 2021-22.
The sales tax rates for mobile phones are currently dealt with in the Ninth Schedule of the Sales Tax Act.
According to ProPakistani, the government will levy a 17 percent sales tax on cellular mobile phones in CKD/CBU form under the Sales Tax Act 1990’s Ninth Schedule. All of these taxing measures are part of an effort to raise Rs. 330 billion in additional income this fiscal year by eliminating loopholes. However, it has been noted that the government may not eliminate all of the Rs. 330 billion in sales tax exemptions all at once. Due to inflationary effects, some would be withdrawn via Presidential Ordinance and the remainder would be included in the next budget.
According to the FBR, the sales tax zero-rating under the Fifth Schedule of the Sales Tax Act generates roughly Rs. 12.887 billion in revenue. The FBR would gain Rs. 12 billion in additional income if the primary sales tax was zero-rated under the Fifth Schedule of the Sales Tax Act.
The enforcement of the regular rate of 17 percent sales tax on imports and local supply stages of the five biggest export industries during 2021-22 will generate a significant portion of the expected revenue of Rs. 330 billion from the removal of sales tax exemptions.
The removal of 10% reduced sales tax rates would yield Rs. 69 billion in additional income. This is feasible following the establishment of a 17% sales tax on items formerly subject to a 10% sales tax.
The decreased sales tax rate of 5% has an economic effect of Rs. 27 billion under the Eight Schedule of the Sales Tax Act. The substitution of a 5% sales tax with a 17% sales tax will yield an additional Rs. 27 billion in revenue.
The reduced sales tax rate of 2%, as stipulated in the Eighth Schedule of the Sales Tax Act, generates Rs. 90 billion in income. The substitution of a 2% sales tax with a standard rate of 17 percent would generate additional revenue.
The exemption from sales tax on imports was the single largest contribution to the rise in sales tax exemptions, resulting in a substantial revenue loss of Rs. 173.808 billion in 2020-21. The absence of sales tax on local products resulted in a drop in revenue of Rs. 156.134 billion, compared to Rs. 54.871 billion, a significant fall of Rs. 192.429 billion. Sales tax exemptions on essential food goods and health-related purchases, on the other hand, would be preserved.
Sales tax exemptions cost Rs. 578.456 billion in 2020-21, up from Rs. 518.814 billion in 2019-20, a rise of Rs. 59.642 billion; income tax cost Rs. 448.046 billion, up from Rs. 378.03 billion, a rise of Rs. 70.01 billion.
The zero-rating under the 5th Scheduling system to the Sales Tax Act 1990 tends to result in a revenue loss of Rs. 13.671 billion out of total exemptions of Rs. 518.814 billion conferred throughout 2019-20; exemption on imports Rs. 255.843 billion; indult on local supplies Rs. 54.871 billion; reduced rates under the 8th Schedule (2 percent) Rs. 74.008 billion; discounted prices under the 8th Schedule (5 percent) Rs. 8.677 billion; reduced rates under the 8