No Special Excise duty on supply chain covered under subject SRO.

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1 Sales Tax Reference: SRO 283(I)/2011, Dated: April 01, 2011 Date: April 01, 2011 Revamping of Sales Tax Zero-rating Scheme for exports Brief Sales Tax zero-rating facility to five major export sectors (textile, carpets, leather, surgical and sports goods) has been revamped and rationalized. This new scheme will facilitate exports, reduce refunds, bring revenue gains on domestic consumption, promote economic documentation and attract transfer of investments from grey to white economy, besides easing out the cash flow of major export sectors. Commentary Subject SRO is covering different provisions of the Sales tax Act, 1990 and Federal Excise Act, SRO 509(I)/2007 dated 9 th of June, 2007 has been superseded and revamped through SRO 283(I)/2011 dated 1 st of April, 2011 List of 136 items in addition to five major export oriented sectors (textile, carpets, leather, surgical and sports goods) is increased to 180 items, where sales zero percent will be charged. The main purpose of the scheme is to encourage registered sector and discourage unregistered sector by charging sales 4% and 6%. No Special Excise duty on supply chain covered under subject SRO. Zero ration is available subject to fulfillment of few conditions otherwise 4% or 6% sales tax will be charged, the conditions are tabulated below: CONITIONS FOR APPLICATION OF SRO 283(I)/2011, dated TEXTILE SECTOR Condition Sales 0% Sales 4% Sales 6% Exempt a(i) Transaction between Sales tax registered buyer & seller engaged in manufacturing & trading in textile sector (including carpet & jute) other than retailer

2 a(ii) Registered Importer, traders, manufacturers, exporters sells goods to registered Commercial Importer sells goods (usable in textile sector upto spinning stage including yarn & its by-products ) to un-registered Commercial Importer sells goods to unregistered a(iii) No sales tax at ginning or manmade & synthetic fiber manufacturing stage a(iv) a(v) Registered manufacturer (having direct input from imports or acquiring from commercial importer or registered manufacturer) selling goods relate to after spinning stage to unregistered Registered manufacturer (having direct input from imports or acquiring from commercial importer or registered manufacturer) selling yarn & its bye product to unregistered Unregistered i.e. traders or engaged in sizing, warping, weaving, intermediary & other ancillary process etc. ( before process of finished fabric) paid 6% sales tax to spinning mill. a(vi) Textile processing services by registered to unregistered a(vii) Sale of fabric by registered manufacturer to unregistered

3 a(viii) At processing or finishing stage of fabric or stitched fabric, the supply of goods including finished products like finished/dyed/processed/printed fabric, textile apparel, home textile and clothing including garments and all non-woven products etc by registered to unregistered. a(ix) Supply of goods to retailer by the registered who acquired 0% under this notification. LEATHER, SPORTS & SURGICAL GOODS SECTORS: Condition Sales 0% Sales 4% Sales 6% Exempt b(i)&(ii) Transaction between Sales tax registered buyer & seller (Complete supply chain which include tanneries & manufacturers of surgical and sports goods including the engaged in ancillary industrial activities) other than retailer

4 b(iii) Jobbers working prior to manufacturing of leather, surgical and sports goods in tanneries & other manufacturing units having sales less than Rs. 5 million or utilities less than Rs. 700,000 (Cottage industry) b(iv) Supply of finished product of leather, sports or surgical goods to any un-registered by a manufacturer other than tannery. Finished goods supplies to retailers Tannery supplies its product to unregistered. Miscellaneous Conditions S. # Condition c(i) c(ii) c(iii) Applicable to Leather & articles thereof including artificial leather footwear, textile & articles thereof, Carpets, Sports and surgical goods sectors No input adjustment against sales 6% or 4%. Refund against zero rated supply against goods not covered in this notification shall be paid within one week of filing of complete claim Registered of these sectors is entitled to acquire utilities at zero rate (Electricity, Gas) c(iv) c(v) c(vi) c(vii) c(viii) c(ix) Sales 0% shall be reflected on tax invoice issued by the registered supplier to registered buyer No SED on goods of the said sectors covered in the notification Person registered between to previously engaged in business of these sectors, no question on account of past transactions for the purpose of Sales tax and Federal Excise. Commercial importer registered on or after 1st of April 2011 shall submit to the Collector of Customs a Certificate from the bank to confirm his financial soundness. Commercial importer registered before 1st of April 2011 should be active on Active Taxpayer List of FBR and have done a declared business activity in any of the tax periods during last 12 months. Composite units including wholesale covering supplies upto retail stage shall pay 4% sales tax of the value of supply and shall not be liable to pay any other tax under the Sales Tax Act, 1990

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