ISLAMABAD: The payment of customs duty rebate to the textile sector doubled during tax year 2020.
According to details issued by the Federal Board of Revenue (FBR), the payment of customs duty rebated was Rs18.31 billion during tax year 2020 as compared with Rs9 billion in the preceding tax year, showing an increase of 103.33 percent. According to the FBR, the major chunk of the rebate payment to the textile sector was issued to ready-made garments and fabric made-ups.
The payment of customs duty rebate to the ready-made garment industry was Rs6.5 billion during tax year 2020 as compared with Rs1.88 billion in the preceding tax year, showing a growth of 246 percent. Likewise, the payment of duty rebate to fabric and made-up increased to Rs6.41 billion in tax year 2020 as compared to Rs1.12 billion in the preceding tax year, showing an increase of 472 percent.
The FBR has taken all possible measures to provide relief through payment of refunds and rebate to sectors of the economy for resolving liquidity issues during the coronavirus pandemic. The FBR issued a rebate to the tune of Rs1.56 billion to the hosiery industry during tax year 2020 and Rs1.24 billion to the cotton fabric industry.
The FBR issued an amount of Rs24.4 billion as a total duty rebate during tax year 2020 as compared with Rs14 billion in the preceding tax year, showing an increase of 74 percent.
It is pertinent to mention that FBR last week announced to allow exporters of the five ex-zero rated export sectors, including the textiles and clothing industry, to refile their claims for “missing amounts” of their past sales tax refunds, that is a major relief. In a circular, the FBR admitted that the flaws in its fully automated sales tax e-refunds (FASTER) system rolled out almost a year ago for fast-track processing and payment of export refund claims in 72 hours “simply missed out on the sales tax credits of various taxpayers”, thus stalling the processing of refund claims.
The FBR claims that the flaws in FASTER have been remedied and matters regarding the processing of past missing amounts of sales tax refunds resolved. In such cases, where missing amounts could be pulled up by the system, according to the circular, the taxpayers have been asked to refile claims after adjusting refund claims and sales tax returns. In other cases, taxpayers have been asked to apply to the field formations concerned if they believe that a “material amount of their refund claims remains unaccounted for”.
It is expected the officials concerned will take immediate action on their requests and sanction the claimed amount after quick examination and verification.
Meanwhile, the collection of withholding tax (WHT) on registration of new cars has declined by around 39 percent in tax year 2020 due to the coronavirus pandemic that lowered the sales of locally assembled motor vehicles.
According to details released by Federal Board of Revenue (FBR), the collection of withholding tax fell to Rs5.88 billion in tax year 2020 as compared with Rs9.58 billion in the preceding tax year.
The drastic fall in revenue collection has been attributed to lower car sales that were impacted by Covid-19 and slowdown in the economy.
The annual sales of locally assembled cars posed a decline of 53 percent during fiscal year 2019/2020. According to Pakistan Automobile Assemblers Association (PAMA), the total car sales in the country were recorded at 110,583 units during fiscal year 2019-20 as compared with 235,229 units in the preceding fiscal year.
The provincial motor vehicle registration authorities collect withholding tax on behalf of the FBR. The withholding tax has been collected on the registration of new motor cars under Section 231B of the Income Tax Ordinance, 2001.
However, collection of withholding tax on registration and transfer of motor vehicles surged 177 percent during the first eight months of the current fiscal year, an upshot of an additional tax imposed in February 2021 to deter ‘on money’. The collection of withholding tax on registration of new motor vehicles or transfer of ownership of a motor vehicle grew to Rs1.72 billion during July-February 2020-21. That compared with Rs621 million in the same period of the last fiscal year.
Through the Tax Laws (Amendment) Ordinance, 2021, which was promulgated in February 2021, a new provision in Section 231B was introduced under which additional tax was imposed on first sale of new registered motor vehicles within 90 days. “Every motor vehicle registering authority of excise and taxation department shall collect advance tax from the buyers of locally manufactured motor vehicles who subsequently sell it within ninety days of delivery of such vehicle whether prior to or after registration,” says the amended law.
It is pertinent to mention that Pak Suzuki Motor Company in its yearly report released last month showed that net sales dropped in CY20 due to a volumetric decline of 47 percent in the units sold. The report said that the carmaker dispatched 59,052 units in 2020 against 111,543 units in 2019. – TLTP