RGST bill to be introduced in National Assembly during current session

ISLAMABAD: Finance Minister Dr.Abdul Hafeez Shaikh said on Wednesday that the Federal Cabinet has approved the Reforms General Sales Tax (RGST) Bill and to be introduced in the National Assembly for approval during the current session.The Federal Cabinet has approved the RGST bill for approval of the parliament under which a flat rate of 15 percent GST will be levied in reformed form with no new taxes, he said while briefing the newsmen after Cabinet meeting chaired by Prime Minister Syed Yusuf Raza Gilani here Wednesday afternoon.Dr.Shaikh was flanked by Federal Minister for Information and Broadcasting Qamar Zaman Kaira and Interior Minister Rehman A Malik.
“The government has imposed no new taxes instead it has brought reforms in the flawed taxation system of subsidies and distortions in order to expand the coverage of taxation system for benefit of the country.He said the current taxes varied from 17 to 25 percent which have been brought to uniform rate of 15 percent benefiting the tax payers in the country and for the documentation of the national economy.He said that government has tried its best that introduction of RGST should not put an additional tax burden on the commonman.The Finance Minister said that the annual threshold for taxes to retailers has been enhanced from Rs.5 million to 7.5 million for the relief of the poor people.
Dr. Shaikh said that government earlier in the budget 2010-11 announced to implement RGST from October 1, 2010 but it was the desire of the government to generate consensus among the provinces on the issue which took time.He said that after consultations with all the provinces the government has approved RGST Bill from the Cabinet and introduce it in the current session of the Parliament.“We want that ordinary citizen should not hurt of RGST and burden should be shared who are capable of paying their due taxes”, he remarked.
He said that after approval the RGST Bill from the parliament, it would be implemented by the end of this year.

He clarified that under the proposed RGST no tax is being imposed on edible, and education and RGST will be approved after through discussion in the parliament.Highlighting the decisions of the Federal Cabinet on the Reform General Sales Tax Bill, Hafeez Shaikh said that the Cabinet has in principle approved the Draft to table the Bill for discussion and approval of the Parliament.The Cabinet was informed that the new Bill had been prepared after the consultation and unanimous approval of the Council of the Common Interest (CCI).
He said this will immediately provide relief on electricity and fuel prices adding that the RGST is a step towards documentation of the economy and will help broadening of tax base in the country.The minister further elaborated that RGST will only be collected on those services as authorized by the provinces and they will be the sole beneficiary of tax on services.He said that Sales Tax on goods will be collected by the FBR, however, its collection on services will be subject to authorization of the provinces.The Finance Minister while elaborating the salient features of the Reform General Sales Tax Bill said under the new GST law, exemptions have been kept intact in respect of basic food items including wheat , rice, pulses, vegetables, fruits, live animals, meat and poultry etc.
Edible oil chargeable to Federal Excise Duty will remain exempted from GST as before. He further said that the exemptions earlier available for philanthropic, charitable, educational, health or scientific research purposes or under international commitments /agreements including grants-in-aid will also continue.

Moreover, he said that life saving drugs, books and other printed materials including newspaper and periodicals have been kept exempted.The Minister said local consumption of sectors like textile (including carpets), leather surgical and sports goods has, however, been subjected to tax.Similarly, defence stores, stationery items, dairy products, pharmaceutical (other than lifesaving), agricultural inputs, agricultural machinery and implements, aviation/navigation equipments including ships and aircraft etc. are also proposed be taxed, he added.He explained that acquisition of capital goods will be facilitated through expeditious adjustment/refund of input tax involved therein.
He estimated that due to reduction in standard rate and increase in exemption threshold, the short term revenue gained from GST will be between Rs 25-30 billion despite withdrawal of several exemptions, yet the long term benefits of the new system will be substantial.
He said that besides modernizing the consumption taxation system in the country, it will help in documentation of the national economy, broadening of tax base and increase in tax-to-GDP ratio from the present below 10% to over 12% in next three to four years.
Regarding the flood tax he said that the Cabinet has also approved the draft Bill of revenue measures to meet extra budgetary expenditures one-time Flood Relief Surcharge 2010 and increase in Special Excise Duty to raise additional resources for provision of relief to the flood affected people and to fund the rehabilitation and reconstruction work.
Introduction of Flood Relief Surcharge and increase in Special Excise Duty on imports as well as on domestic produce or manufactures under the Federal Excise Act, 2005 is estimated to generate additional revenues to the extent of Rs 42 billion for the remainder of financial year 2010-11.

This Surcharge will be levied at the rate of 10 percent on every tax payer’s Income Tax payable amount.The Cabinet approved to enhance the existing rate of Special Excise Duty from 1 to 2 percent to generate additional revenue at an estimated amount of Rs 11 Billion.    The amended duty bill will take effect immediately after Parliament’s approval till the period ending on June 30, 2011.Earlier, the Cabinet was apprised that one percent Special Excise Duty is being levied since July 2007 on notified categories of non-essential imports and domestic manufacturers such as air conditioners, beverages, cigarettes, cosmetics, deep freezers, detergents and motor cars etc – App