FBR Press Release

FBR has not imposed any new tax on household gas and electrical appliances, tiles, tyres etc.. these goods were chargeable to sales tax on retail price basis.

FBR has not imposed any new tax on household gas and electrical appliances, tiles, tyres etc.. these goods were chargeable to sales tax on retail price basis. Sales Tax on retail price basis means that sales tax of the complete chain from manufacturer till retailer is paid upfront by the manufacturer. This business community approached FBR on grounds that that this system has posed many practical problems for them and requested FBR to do away with charging sales tax on retail price basis and in its lieu agreed to pay 2% additional sales tax (worked out on the basis of actual value addition from manufacturer till retailer) on all these items. This is, therefore, not a new tax or enhancement of existing rate but only collection of tax which even otherwise was payable by the supply chain. ”
 
The News item relayed by certain news channels regarding imposition of 2% additional sales tax on household gas and electrical appliances, ceramic tiles, tyres, foam & mattresses, auto parts, confectionery items is based on misinterpretation of SRO896(I)/2013 issued on 4th October 2013.
During Budget 2013, all these goods were added in the Third Schedule to the Sales Tax Act, 1990 to charge sales tax on retail price basis. The concept of charging sales tax on the basis of retail price is to charge the complete sales tax of the entire supply chain from the manufacturers till retail stage upfront from the manufacturer. This step was introduced to collect sales tax payable by dealers. Distributors and retailers on their value addition as virtually no collection was being made from these segments for these goods.
FPCCI, KCCI and Trade Associations of all these goods approached FBR with request that it is practically impossible for these sectors to comply with the requirements of printing retail price on each and every item to be sold in the market. These sectors also stated that the prices of these goods vary from market to market due to many circumstances, which makes it even more difficult to comply with the requirements of charging sales tax on retail price basis.
FPCCI, KCCI and Trade Associations requested that an alternate mode of collection of tax from dealers, distributors and retailers of these goods may be devised but the condition of charging sales tax on retail price basis may be done away with. In line with the requests of the these sectors, FBR omitted these items from the Third Schedule  to the Sales Tax Act, 1990, and in its lieu imposed a 2% additional tax on these items to be paid by the manufacturers in consultation and with the consensus of the trade bodies to provide relief to the business and for providing ease of business. The rate of 2% was also worked out on the basis of actual value addition of these sectors from the manufacturers till retail stage.
 
 
Furthermore, it is also informed that the following items of daily and essential use are not chargeable to sales tax:-