The Federal Board of Revenue (FBR) has been authorized to set the value of imported (retail price) items for the purpose of sales tax at a higher rate of 130 percent of the value fixed by the Board.
According to a sales tax circular issued by the FBR, if the Board decides it is necessary to establish the value of imported items listed under the Third Schedule (printed retail price items), the sales tax may be levied at 130 percent of the value fixed by the Board. This value includes customs duty, federal excise duty, and other applicable taxes, excluding sales tax, as specified in the sales tax general orders (STGOs).
The remaining sales tax must be paid by the importer along with their sales tax return, as the sales tax calculated on the retail price is higher than the amount paid on import at 130 percent of the Board-fixed value.
The FBR explained that the first proviso to clause (46) of section 2 of the Sales Tax Act (STA) empowers the Board to determine the value of any imported goods or taxable supplies if deemed necessary. The Board may set different values for various classes or types of imported goods or supplies.
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This proviso was amended through the Finance Act, 2024, to explicitly allow the Board to fix the value of supply for imported goods specified in the Third Schedule to the STA. These goods are subject to sales tax at a rate of 18 percent of the retail price under clause (a) of sub-section (2) of section 3 of the STA.
As a result of this amendment, the Board can now set the value of supply for Third Schedule items, which will be used to determine their retail price as defined in Section 2(27). For instance, in the case of imported tea, the Board, through sales tax general order (STGO) No. 104 of 2019 dated August 29, 2019, and STGO No. 103 of 2019 dated August 7, 2019, specified that tea importers must pay sales tax on the retail price. The retail price must be at least 130 percent of the imported value, including assessed customs duties, excise duty, and other applicable taxes and charges, excluding sales tax.
It was further clarified in STGO No. 104 of 2019 that after paying sales tax at 130 percent of the value of imported tea, the remaining sales tax based on the retail price must be paid along with the sales tax return.
