Significant Amendments in Sales Tax, ICT, and Excise Introduced by Finance Act, 2023

This circular outlines important amendments to the Sales Tax Act, 1990 (STA), the Federal Excise Act, 2005 (FEA), and the Islamabad Capital Territory (Tax on Services) Ordinance, 2001 (ICTO) introduced by the Finance Act, 2023. These changes impact businesses and individuals in various ways, so it's crucial to understand them clearly.

ey Changes:

Dispute Resolution Revamp: A revamped Alternative Dispute Resolution mechanism simplifies dispute resolution for registered persons. The process is now faster, with a neutral third party (retired judge) leading the committee.
Sales Tax Updates:
- Retail Revenue Measures:
  - Increased sales tax to 15% for Tier-1 retailers of finished fabrics and textile items.
  - Sales tax imposed on DAP fertilizer (5% rate).
  - Increased further tax rate to 4% for unregistered or inactive taxpayers.
- Relief Measures:
  - Increased threshold for zero-rated infant preparations to Rs. 600 per 200 grams.
  - Extended sales tax exemption for FATA/PATA industries till June 30, 2024.
  - Streamlined exemption for wheat bran.
- Other Measures:
  - Removal of covered area category for Tier-1 retailers.
  - Enhanced penal action scope for specific offenses.
  - Expanded scope of zero-rating for supplies to EFS exporters.
  - Clarification on tax exemption for blood transfusion sets.
  - Reduced sales tax of 1% extended to alternative medicines/medicaments.
  - Electricity transmission excluded from GST purview.
ICT (Tax on Services) Updates:
- New 15% tax on electric power transmission services.
- Reduced 5% sales tax for restaurant payments through digital methods (debit/credit cards, mobile wallets, etc.).
- Streamlined and harmonized IT and ITeS scope.
Federal Excise Act Updates:
- Increased FED on tobacco mixture in electric heating devices.
- Increased FED on sugary fruit juices and syrups.
- New FED on energy-inefficient fans and incandescent bulbs (effective January 1, 2024).
- New 5% ad valorem FED on all fertilizers.
- Expanded FED scope to include royalty and fee for technical services.
- New clause for FED on items not covered as goods or services.
- Alignment of FEA and STA procedures for publication of general orders, etc.