The government may prepare a Finance (Supplementary) Bill-II, 2022 to withdraw further sales tax exemptions.

Sources told Business Recorder on Monday that another Finance (Supplementary) Bill-II, 2022 may be drafted during the current month to withdraw further sales tax exemptions from next month.

Among other exemptions to be withdrawn, the government may withdraw sales tax exemption on fertilisers, pesticides, and tractors next month or in the coming budget (2022-23) and design a more equitable subsidy scheme for these sectors.

Under the exercise, the government will review the remaining sales tax exemptions and concessions available to various sectors. The exemptions would be withdrawn, if necessary.

According to sources, the drafting of the Finance (Supplementary) Bill-II, 2022 is yet to start, but it may amend the Finance (Supplementary) Act, 2022, which has been enforced from January 16, 2022.

The Finance (Supplementary) Act, 2022 has withdrawn sales tax exemptions to the tune of Rs343 billion from January 16, 2022. Out of total sales tax exemptions, 60 percent of the exemptions have been withdrawn.

However, the government requires additional time to design a more equitable subsidy scheme to replace tax expenditures on fertilisers, pesticides, and tractors—currently accounting for 23 percent of total tax expenditures—which will be implemented in the fiscal year (2022-23) budget after deliberations in the Fertilizer Commission constituted by the government.

If the Finance (Supplementary) Bill-II, 2022 is enforced, some of the remaining exemptions may be withdrawn from March 2022.

This report was first published in Business Recorder on February 8, 2022.