Green house machinery: ST exemption likely to curb misuse of zero-rating facility

RECORDER REPORT

ISLAMABAD: The government has decided to give sales tax exemption on sprinklers, drip equipment, spray pumps and nozzles and import and supply of polyethylene and polypropylene used in the manufacture of mono filament yarn and net cloth in budget (2012-13).

Sources told Business Recorder here on Wednesday that the sales tax zero-rating facility is available under the relevant notifications to sprinklers, drip equipment, spray pumps and nozzles. The import and supply of polyethylene and polypropylene for manufacture of mono filament yarn and net cloth is also zero-rated.

The FBR has found that the sales tax zero-rating facility has been grossly misused by unscrupulous elements by claiming illegal refunds of sales tax. The FBR has strongly proposed that these items may be exempted from sales tax to check illegal refunds.

Background of the issue revealed that zero-rating on green house machinery was introduced in 2009 with the objective to promote newly introduced green house farming in Pakistan. However, it was observed that a large number of refund claimants were out to avail the facility and reportedly billions of rupees of refunds were availed by the unscrupulous elements. The government to curb the abuse of this facility is likely to change the facility of zero-rating with the exemption. The proposed change on one hand will result in reducing abnormal sales tax refunds and on the other the sector will benefit as the exemption will remain intact, sources added.