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Summary
Introduction of Value Added Tax (VAT) after approval from the Parliament would replace General Sales Tax (GST) at the rate of 15 percent on consumption. It would enhance tax to GDP ratio to more than 3 percent adding additional tax collection of Rs.125 billion during first year of the implementation. The introduction of 15 percent VAT at consumption level would not escalate inflation instead it would help encourage voluntary tax compliance at consumption and retail levels, besides benefiting the economy in the country, Chairman FBR Sohail Ahmed told a crowded press conference here on Thursday.Asrar Raouf member Direct Taxes/Spokesman, and other senior members of the FBR were also present on the occasion. It is a replacement of GST and not a new tax and who soever is a buyer should have to pay the consumption tax or VAT at 15 percent, he added. He said that Pakistan has huge potential to enhance its revenues base by implementing the Value added tax and generate revenues for the prosperity and economic sovereignty of the country. The Chairman FBR declaring the VAT as a sharing tax, expressed the hope that due to high potential in the tax, after the implementation of VAT , the countrys revenue would be enhanced to about Rs.500 billion in next few years. He added that VAT has also been tabled in the four provinces besides the National Assembly and Senate for approval. Sohail Ahmed added that VAT has been successfully implemented by many countries in the world and enhanced their tax collections smoothly by using the system. He added that as part of awareness campaign, he and his senior colleagues launched a comprehensive drive to educate the people specially the business community about the importance of VAT for the economy and the country. He said that FBR is currently holding meetings with trade associations and chambers and other business community to educate them about the significance of the VAT for the development of the country. He added that VAT is also an adjustable tax and is also a burden sharing tax. The Chairman FBR also hoped that it the implementation of VAT would be a step towards documentation of national economy besides broadening the tax base in the country. He added that under the NFC award, the collection of taxes on services is the right of the Provinces and FBR being a technically tax collecting agency with expertise at Federal level can collect revenues on services also after only the approval from any province. He added that any business whose annual income threshold is Rs.7.5 million is liable to pay VAT.
