Reduced source tax on export from January

The National Board of Revenue (NBR) has decided to make reduced rate of source tax, 0.25 per cent, on export proceeds effective from January, 1, 2019.

The board will issue a clarification today (Friday), mentioning the date of effectiveness of the reduced rate of source tax, officials said.

A senior official of NBR's Income Tax Wing said the 0.25 per cent source tax for exporters will be effective from the date on which the Statutory Regulatory Order (SRO) in this regard was issued.

As the date of effectiveness was not mentioned in the SRO, issued on January 1, 2019, it was assumed that the reduced rate came into effect from July 1, 2019.

Another tax official said as per the SRO, the date of effectiveness of the slashed source tax is July 1, 2018, unless NBR issues another SRO mentioning the date.

He said legal complexities might be created, if NBR issues only clarification, but not SRO, with the date of effectiveness.

Officials said NBR has decided to issue clarification on this issue following confusions of the banks over the date of effectiveness of revised source tax for exporters.

NBR on January 1 reduced the source tax on export proceeds to 0.25 per cent for all sectors, including ready-made garments (RMG) and excepting Jute, from 0.60 per cent, amending the previous SRO following demands of RMG exporters.

NBR, however, did not mention the date when the rate would come into effect in the new SRO.

NBR issued the previous SRO on September 5, reducing the tax rate to 0.60 per cent from 1.0 per cent set in the budget for the current fiscal year, 2018-19.

Meanwhile, NBR issued two separate SROs, dated January 14, offering duty benefit for export-oriented RMG industries, and slashing VAT for internet services infrastructure companies.

RMG exporters will enjoy duty benefit on import of some additional fire-safety equipments and chemicals, as per the latest SRO.

Import of cold fire, fire-fighting agent, extinguishing agent, empty CE stainless water fire-extinguisher, cold fire tactical loop, tactical loophole can, and sprinkler system and equipments will enjoy the duty benefit.

The duty rates on import of the products ranged from 12.73 per cent to 60.73 per cent.

Now, importers will have to pay only 5.0 per cent customs duty on import of these items.

Besides, 15 per cent VAT on services of internet infrastructure companies has been reduced to 5.0 per cent.

The reduced VAT rate will be applicable on services provided by International Terrestrial Cable (ITC), International Internet Gateway (IIG) and Nationwide Telecommunication Transmission Network (NTTN) companies.

Internet service providers and mobile operators require services from these three sectors to take their services to end-consumers.

Officials said the VAT has been reduced following request of the Ministry of Information and Communication Technology (ICT).

The ICT minister, earlier in a letter to NBR, said the end-users or consumers will not get benefit of VAT exemption on internet services unless NBR cuts the VAT rate for the relevant services.

However, NBR's VAT Wing strongly opposed the proposal, and said some other relevant services on internet are subject to paying 15 per cent VAT. So the VAT reduction will not help to reduce internet service charges for the consumers.

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