Islamabad: FBR Issues Updated Sales Tax and Federal Excise Acts. The Federal Board of Revenue (FBR) has released the revised editions of the Sales Tax Act, 1990, and the Federal Excise Act, incorporating amendments introduced through the Finance Act 2023, as reported by a leading newspaper on July 5. These amendments bring about notable modifications to the tax system in Pakistan.

Here are the key details regarding the updated Sales Tax Act and Federal Excise Act:

A 4% additional tax will be imposed on the value of supplies made to individuals who are not registered or are not active taxpayers.

Individuals engaged in the manufacturing, possession, transportation, distribution, storage, or sale of specified goods with counterfeit tax stamps, banderoles, stickers, labels, or barcodes will have their goods confiscated outright.

Sales tax zero-rating will apply to imports or supplies made by, for, or to qualified investments mentioned in the First Schedule of the Foreign Investment (Promotion and Protection) Act, 2022, within the timeframe specified in the Second Schedule of the Act.

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Sales tax exemption will be granted to blood transfusion sets that are not packed in aluminum foil but are imported alongside blood bags CPDA-1, in the same shipment and corresponding quantity.

Supplies and imports of plant machinery and equipment for installation in tribal areas are exempt from sales tax. Industrial inputs used by industries located in tribal areas also qualify for the exemption. These exemptions will remain in effect until June 30, 2024.

Sales tax exemption is provided for electricity supplies made to residential and commercial consumers in tribal areas, as well as industries in tribal areas that were established and commenced production before May 31, 2018, with specific sectors excluded. This exemption is valid until June 30, 2024.

A 1% sales tax applies to substances registered as drugs under the Drugs Act, of 1976, and medicaments classified under Chapter 30 of the First Schedule to the Customs Act, of 1969. However, certain items such as filled infusion solution bags, scrubs, detergents, surgical tapes, disinfectants, and cosmetics are exempt from this tax.

Raw materials used for the primary manufacturing of pharmaceutical active ingredients and products are subject to a 1% sales tax. Reduced tax rates apply to imported raw materials subject to specific conditions.

These amendments bring significant changes to Pakistan’s tax system, with the aim of streamlining processes, tackling counterfeiting issues, and providing exemptions for specific goods and areas.