960410

Dialogue with IMF: levy

of ST on 28 industries

likely from next fiscal

NADEEM MALIK

ISLAMABAD: Except for the brick kilns, all the 28 industries falling under Fixed Tax Scheme (FTS) would be subjected to Sales Tax from the next fiscal year.

According to the official sources, the recent round of negotiations in Washington, between Pakistan and IMF, has exclusively discussed the withdrawal of all exemptions, except for unprocessed food, fertilizers and pesticides. Qazi Aleemullah, who was heading the Pakistani side, requested the IMF for deliberation over impositions of General Sales Tax (GST).

Imposition of GST is not part of the IMF's conditionalities. However, the fund managers have made it clear that, in order to get the third tranche of $596 million stand-by-loan, all exemptions at import and manufacturing stage would have to be withdrawn from the 1996-97 budget.

The brick kilns industry would keep on enjoying these exemptions till June 30, 1997, because the government had given them this moratorium last year after withdrawing Sales Tax.

The Industries, which are presently enjoying fixed tax and would be subjected to sales tax from next fiscal year, are:

Fasteners (Nut & Bolts) SRO 608(I)95, ceramic sanitary ware SRO 609(I)95, brass & water fitting SRO 610(I)95, melamine crockery SRO 611(I)95, P.V.C. pipes SRO 612(I)95, aluminium utensils SRO 613(I)95, printing & graphic SRO 614(I)95, plastic goods (PG) SRO 615(I)95, PG large units SRO 616(I)95, RCC pipes SRO 617(I)94, wire netting SRO 618(I)94, sweetened supari (SS) SRO 619(I)94, SS large units SRO 620(I)95, plastic bags SRO 621(I)95, corrugated & solid board SRO 622(I)95, marble tiles SRO 623(I)95, agarbatties SRO 624(I)95, agarbatties large unit SRO 625(I)95, paper cones SRO 626(I)95, furniture SRO 627(I)95, plastic dori SRO 628(I)95, rerolling mill (auto) SRO 629(I)95, rerolling mill (non-auto) SRO 630(I)95, sewing thread (ST) SRO 631(I)95, ST large units SRO 632(I)95, desert coolers SRO 633(I)95, electric geysers/water coolers/domestic type gas (APPL.) SRO 634(I)95, washing machines SRO 635(I)95, and processed fabrics SRO 636(I)95, all issued on July 2, 1995.

The government is unlikely to extend GST into a more broad-based Value-Added Tax (VAT) at retail level in the 1996-97 budget.

According to the sources, IMF has not demanded to go for VAT at retail level in the next year's budget, and the imposition of GST at retail level is being propagated through press, purposely, to prevent a political back-lash at the time of withdrawal of tax exemptions.

Almost two years ago, about 225 items were put to tax at import and manufacturing stage, which created enormous reaction from business community and general public. In order to prevent any such eventuality, the government has decided to prepare them for harsh-measures, much before the budget of 1996-97.

Finally, at the time of budget announcement, the government will through the onus of stringent tax collection measures and withdrawal of exemptions on IMF, would claim credit that it had decided not to extend GST at retail level in greater interest of the people of Pakistan, despite the IMF pressure.

Earlier, there was a buzz in the press that 12 items, namely, cloth, ready-made garments, hosiery, knitwear, jewellery, arms and ammunition, motor vehicles, motorised two and three wheelers, air conditioners, deep freezers and refrigerators, would be subjected to VAT at retail level in the budget of 1996-97.

The sources confided that "we" are obliged to eliminate all tax exemptions at import and manufacturing level under the agreement with IMF, but imposition of VAT in the next years budget is just a matter of "tricks". They added that the government may think to impose VAT on arms and ammunition at retail level which such levy on textile madeups was unlikely.