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CBR lists zero-rated sales tax machinery

ISLAMABAD (December 19 2005): Taking a major step to facilitate the investors, the Central Board of Revenue (CBR) has issued a new list of plant, machinery and equipment on which sales tax would be charged at the rate of zero percent at the import stage and local supply under SRO 530(I)/2005.

The CBR on Sunday issued instructions to all the collectors of customs to extend the benefit of SRO 530(I)/2005 to the machinery/equipment covered under the Pakistan Customs Tariff (PCT) heading given in the indicative list.

The list contained all the relevant plant/machinery and equipment liable to zero-rating of sales tax. However, customs authorities would charge sales tax on the machinery/equipment, which are not specified in the list.

According to the CBR instructions, it has issued two indicative lists of tariff headings covered under the SRO. 530(I)/2005.

The items specified in the Annexure-A would be applicable on the import of plant, machinery, equipment and parts thereof and Annexure-B relates to the local supply of plant, machinery and equipment (whether imported or locally manufactured). The collectors of customs should instruct all the officials concerned at the ports to extend the benefit of SRO. 530(I)/2005 to the tariff headings contained in these lists.

According to SRO. 530(I)/2005, sales tax would be charged at the rate of zero percent on the imported plant, machinery and equipment including parts thereof. This benefit is only available to machinery imported against statutory rate of customs duty of 5 percent or against a notification under section 19 of the Customs Act, 1969. Secondly, sales tax would also be charged at the rate of zero percent on the local supply of plant, machinery and equipment, whether locally manufactured or imported.

On the other hand, the notification has not given the specific types/classification of machinery/equipment or Pakistan Customs Tariff (PCT) headings for giving sales tax exemption on specific items. This created confusion among the importers as well as customs authorities to ascertain whether a specific machinery is covered under the SRO. 530(I)/2005 or not.

Moreover, it was difficult for the customs at ports to decide whether a specific equipment is liable to zero-rating or not. On one hand, the importer demanded sales tax concession on the import of a specific item, on the other, the customs were reluctant to clear the consignment where applicability of SRO is not clear.

Under the SRO. 530, the expression 'plant', 'machinery' and 'equipment', mentioned in this notification, do not include consumer durables and office machines.

This also created more complications for the importers to decide whether the machine is liable to sales tax at the rate of zero percent or not. In some cases, the customs declare a genuine plant/machinery as consumer durable/office machines and demanded sales tax on the same. Similarly, there are cases where importers deliberately try to clear machinery, which are not entitled to concession as per SRO. 530.

Now, the CBR has issued a comprehensive list to apply zero percent sales tax on the import and supply of plant, machinery and equipment. The sales tax department has been working on the list for the last many months and issued the same in consultation with all the stakeholders, including trade associations, etc.

Following are the Pakistan Customs Tariff (PCT) heading of plant, machinery, equipment and parts on which sales tax would be charged at the rate of zero percent:

ANNEXURE-A:

8401, 8402.1190, 8402.9010, 8404.1010, 8404.9010, 8405.1000, 8405.9000, 8406.1000, 8406.8100, 8406.8200, 8406.9000, 8410.1200, 8410.1300, 8410.9090, 8411, 8412.8010, 8412.9010, 8413.1910, 8413.4000, 8413.8110, 8413.8120, 8413.8130, 8413.9130, 8414.1000, 8416, 8417.1090, 8417.8000, 8417.9000, 8419.3100, 8419.3200, 8419.3900, 8419.6000, 8419.9010, 8420.1000, 8420.9100, 8420.9900, 8421.9110, 8421.9910, 8422.2000, 8422.3000, 8422.4000, 8422.9090, 8424.3000, 8424.9010, 8425.1100, 8425.2000, 8425.3100, 8426.1190, 8426.1210, 8426.1290, 8426.1910, 8426.1990, 8426.2000, 8426.3000, 8428.2000, 8428.3100, 8428.3200, 8428.3300, 8428.3900, 8428.5000, 8428.6000, 8428.9000, 8429.5200, 8430, 8431 (excluding 8431.3100), 8432, 8433, 8434.1000, 8434.2000, 8434.9000, 8435.1000, 8435.9000, 8436, 8437, 8438.1000, 8438.2000, 8438.5000, 8438.6000, 8438.8000, 8438.9090, 8439, 8440, 8441.1000, 8441.4000, 8441.9010, 8442, 8443, 8444, 8445 (excluding 8445.2000), 8446.3000, 8447, 8448 (excluding 8448.3110, 8448.3190, 8448.3330, 8448.4210, 8448.4290, 8448.4900), 8449, 8451, 8452.2100, 8452.2900, 8452.3000, 8452.9090, 8453, 8454, 8455.1000, 8455.2100, 8455.2200, 8455.3090, 8456, 8457, 8458.1100, 8458.9100, 8459 (excluding 8459.2910, 8459.3910, 8459.5910, 8459.6910, 8459.6920, 8459.7090), 8460 (excluding 8460.9010), 8461 (excluding 8461.2010, 8461.5010), 8462 (excluding 8462.1090, 8462.9110), 8463.2000, 8463.3000, 8463.9000, 8464, 8465 (excluding 8465.9110), 8466 (excluding 8466.9310, 8466.9410), 8467, 8468, 8474.1020, 8474.3120, 8474.3210, 8474.3290, 8474.3910, 8474.8010, 8474.9010, 8475, 8477, 8478, 8479 (excluding 8479.2000, 8479.6000, 8479.8210, 8479.8230, 8479. 8290, 8479.9010), 8501.2000, 8501.3200, 8501.3300, 8501.3400, 8502.3900, 8503.0010, 8504.9010, 8504.9020, 8514, 8515, 8526, 8533, 8543.3000, 8543.4000, 8543.8100, 8543.8900, 8543.9090, 9017.1010, 9018.1100, 9018.1200, 9018.1300, 9018.1400, 9018.1900, 9018.2000, 9018.9010, 9018.9060, 9019, 9020.0020, 9021.1000, 9021.5000, 9022 (excluding 9022.3000), 9024, 9026, 9031.1000 and 9031.9000.

ANNEXURE-B:

The sales tax would be charged at the rate of zero percent on the local supply of the plant, machinery, equipment (whether imported or locally manufactured) covered under the following Pakistan Customs Tariff (PCT) headings:

8401, 8402 (excluding 8402.9010, 8402.9020, 8402.9090), 8403.1000, 8404.1010, 8404.1090, 8404.2000, 8405.1000, 8406.1000, 8406.8100, 8406.8200, 8410.1100, 8410.1200, 8410.1300, 8411 (excluding 8411.9100, 8411.9900), 8412.1000, 8412.2100, 8412.2900, 8412.3100, 8413 (excluding 8413.3010, 8413.3090, 8413.9110, 8413.9120, 8413.9130, 8413.9140, 8413.9190, 8413.9200), 8414.1000, 8414.2000, 8416 (excluding 8416.9000), 8417.1010, 8417.1090, 8418.6110, 8418.6190, 8419.4000, 8419.5000, 8419.6000, 8419.8100, 8420.1000, 8421.2100, 8421.2200, 8422.2000, 8422.3000, 8422.4000, 8423.2000, 8423.3000, 8424.3000, 8425.1100, 8425.2000, 8425.3100, 8426.1110, 8426.1190, 8426.1210, 8426.1290, 8426.1910, 8426.1990, 8426.2000, 8426.3000, 8426.9100, 8426.9900, 8428, 8429.5200, 8430, 8432 (excluding 8432.9000), 8433 (excluding 8433.1100, 8433.1900, 8433.9000), 8434.1000, 8434.2000, 8435.1000, 8436 (excluding 8436.9100, 8436.9900), 8437.1000, 8437.8000, 8438 (excluding 8438.9010, 8438.9090), 8439.1000, 8439.2000, 8439.3000, 8440.1000, 8441 (excluding 8441.9010, 8441.9090), 8442.1000, 8442.2000, 8443 (excluding 8443.9000), 8444, 8445 (excluding 8445.9000), 8446, 8447, 8448.1100, 8448.1900, 8448.5100, 8448.5900, 8449, 8451 (excluding 8451.9000), 8452.2100, 8452.2900, 8453 (excluding 8453.9000), 8454 (excluding 8454.9000), 8455.1000, 8455.2100, 8455.2200, 8456, 8457, 8458, 8459, 8460, 8461, 8462, 8463.1000, 8463.2000, 8463.3000, 8463.9000, 8464, 8465, 8467.1100, 8467.1900, 8467.2100, 8467.2200, 8468 (excluding 8468.9000), 8474 (excluding 8474.9010, 8474.9020, 8474.9090), 8475 (excluding 8475.9000), 8477 (excluding 8477.9000), 8478.1000, 8479 (excluding 8479.9010, 8479.9090), 8502, 8504 (excluding 8504.5000, 8504.9010, 8504.9020, 8504.9030, 8504.9090), 8514 (excluding 8514.9010, 8514.9090), 8515 (excluding 8515.9000), 8526, 8530.1000, 8530.8000, 8543.1100, 8543.1900, 8543.2000, 8543.3000, 8543.4000, 8543.8100, 8543.8900, 9006.3000, 9017.1010, 9018.1100, 9018.1200, 9018.1300, 9018.1400, 9018.1900, 9018.2000, 9018.9010, 9018.9060, 9019, 9020.0020, 9021.1000, 9021.5000, 9022 (excluding 9022.3000, 9022.9000), 9024.1000, 9031.1000.

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