Services that are brought under net of VAT

Following services have been planned to brought under the net of Value Added Tax (VAT) to be implemented w.e.f July 2010

advertisements Services……in news papers and periodicals, poles signs and sign boards; facilities for travel including services provided or rendered in respect of travel by air of passenger within the territorial jurisdiction of Pakistan,
services provided or rendered in respect of travel by air of passengers embarking on international journey to or from Pakistan, P
assengers embarking or from Saarc region, UAE (Middle East), Saudi Arabia, Africa, Afghanistan, passengers embarking to or from Europe, Far East, China, USA, Canada, Australia, South America, others; inland carriage of goods by air; shipping agents;
telecommunication services including telephone services, fixed line voice telephone services, wireless telephone, cellular telephone, wireless local loop telephone, video telephone, payphone card, pre-paid calling cards, voice mail service, messaging service, short message service (SMS), multimedia message service (MMS), bandwidth services used for voice and video telecommunication vices, fibre-optic based, co-axial cable based, microwave based, satellite based, telegraph, telex, telefax, store and forward fax services, audiotext services, teletext services, trunk radio services, paging services, voice paging services, radio paging services, vehicle tracking services, burglar alarm services,
Insurance services ……… life assurance, including a re-insurer, including goods insurance, fire insurance, theft insurance, marine insurance, other insurance;
services provided by banking companies or non-banking financial companies; franchise services, services provided by property developers or promoters for development of purchased or leased land for conversion into residential or commercial plots, construction of residential of residential or commercial units, services provided of rendered by stock brokers, services provided or rendered by port and terminal operators in relation to imports excluding stevedoring services.

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Instead of charging standard rate of 15 percent VAT on consumer items, sold in packing, on the basis of printed retail price, a lower rate of 5-6 percent may be proposed. This would reduce the prices of items such as fruit juices, ice cream, aerated waters, cigarettes, detergents, shampoo, toothpaste, shaving cream, perfumery and cosmetics, tea, powder drinks etc after imposition of VAT. However, the final decision would be taken in view of analysing the revenue implications by the Revenue Advisory Council and the FBR.

Sources said there is a strong possibility that the government may introduce two different VAT rates from 2010-11. Sources said that the Federal VAT Act has abolished Third Schedule of the Sales Tax Act, 1990, which would bring items of the Third Schedule under the normal tax regime. Under the Third Schedule, manufacturers have to pay sales tax on all the stages of value addition of consumer items having printed retail price.

A number of dealers, distributors and wholesalers of these consumers goods are still out of tax net despite efforts to bring the intermediate linkages in supply chain into the taxation system and resultantly the tax actually chargeable at each stage on value addition is not being recovered. Under the existing arrangement, manufacture are paying sales tax of all the stages of value addition and only one printed retail price has been paid by the end consumer.

Under the Federal VAT Act, 2010, the manufactures will supply these items on ex-factory price and not on the basis of printed retail price. The wholesalers and retailers would have to pay tax of each stage under the VAT regime. The tax payment by the wholesalers and retailers would be missed unless these wholesalers and retailers are brought into the tax net.

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Anyone who thinks the sky is the limit, has limited imagination.
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Muhammad Irfan Arshad