Mobile phones supply chain: FBR says no input tax adjustment will be available

ISLAMABAD: The Federal Board of Revenue (FBR) Thursday said no input tax adjustment will be available in respect of tax payable under Ninth Schedule at any stage of supply chain of mobile phones.

According to the FBR's explanation of the Finance Bill 2020 issued here on Thursday, the Ninth Schedule governs the sales tax payment on import and local supply of both feature and smart mobile phones. Through Finance Act, 2020, the Ninth Schedule has been restructured with amendments in tax rates as well as in various conditions applicable. Further, some redundant provisions of Ninth Schedule have also been omitted. Important changes are as under Separate rates of tax have been introduced on import of mobiles in CKD/CBU condition and various rates have been provided for different sets depending upon on their values. Moreover, no input tax adjustment shall be available in respect of tax payable under Ninth Schedule at any stage of supply chain of mobile phones, the FBR added.

The Twelfth Schedule provides for the collection of Value added Tax @ 3 percent at the time of import in addition to the normal tax rate applicable to the imports. Previously, in the case of raw materials and intermediary goods exclusion from the purview of the VAT was only available where the Customs duty involved was less than 16 percent. This provision had created hardship for some manufacturers. Hence, raw materials and intermediary goods have now been generally excluded from the purview of 3pc VAT if imported by the manufacturers for their in-house consumption, irrespective of customs duty structure applicable to such imports The FBR added that in view of increasing trend of non-duty paid products and illicit manufacturing of excisable items and products, all products subject to FED have now been made liable to seizure in case FED is not paid. Previously, the scope of such seizure was limited to cigarette and beverages sectors only. Now, if any product which is subject to FED is seized on account of non-duty payment, that will also be subject to confiscation. Necessary amendments in sections 26 and 27 of 2005 Act have been made accordingly.

Copyright Business Recorder, 2020