ISLAMABAD: The government is planning to impose standard rate of 16 percent sales tax on the import and supply of ships and aircraft with their spare parts and equipment in budget (2012-13).

Sources told Business Recorder here on Friday that at present sales tax zero-rating is applicable on supply, repair and maintenance of ships and aircraft under Fifth Schedule of the Sales Tax Act, 1990. The withdrawal of sales tax zero-rating facility on the import and supply of ships and aircraft and their spare parts and equipment is in line with the last year's decision to impose sales tax on the defence stores.

Under the Fifth Schedule of the Sales Tax Act, sales tax zero-rating is available on the supply, repair and maintenance of ship which is neither a ship of gross tonnage of less than 15 LDT, nor designed or adapted for recreation or pleasure. The zero-rating is applicable on the supply, repair or maintenance of any aircraft except an aircraft of weight-less than 8000 kilograms or an aircraft designed or adapted for use for recreation or pleasure. The sales tax zero-rating is also applicable on the supply of spare parts and equipment for ships and aircraft; supply of equipment and machinery for pilot age, salvage or towage services; supply of equipment and machinery for air navigation services and supply of equipment and machinery for other services provided for the handling of ships or aircraft in a port or Customs Airport.

Through Finance Bill (2012-13), the government is expected to amend the Fifth Schedule of the Sales Tax Act, 1990. The amendment would impose 16 percent sales tax on the import and supply ships and aircraft and their spare parts and equipment.

In last budget, the Federal Board of Revenue (FBR) had withdrawn sales tax exemption on defence stores to ensure proper documentation of defence supply chain. In order to ensure proper documentation of defence supply chain and consequently improve the direct tax assessments of the defence supplies, the FBR had withdrawn sales tax exemption on the import and local supply of defence stores. The Board had deleted the relevant entry of the Sixth Schedule of the Sales Tax Act 1990.

Report by: SOHAIL SARFRAZ (Business Recorder)