The Finance Bill 2022-23 has proposed several changes in the sales tax regulations in Pakistan. One of the significant changes is related to the jewellers, who will now fall under the category of tier 1 retailers, making sales tax registration mandatory for them. This article will provide an in-depth analysis of the changes and their implications for jewellers in Pakistan.
Mandatory Sales Tax Registration for Jewellers
The new tax reforms mandate that all jewellers must register for sales tax, regardless of their business size or location. Previously, jewellers were exempted from sales tax registration if their annual turnover was below PKR 7.5 million. However, with the introduction of tier 1 retailers, this exemption is no longer valid. Therefore, all jewellers in Pakistan are now required to obtain sales tax registration from the Federal Board of Revenue (FBR) to continue their operations legally.
POS Integration with FBR
Another significant change introduced for jewellers is the mandatory integration of point of sale (POS) systems with the FBR. This integration aims to ensure transparency in sales tax collection and facilitate real-time monitoring of sales. Jewellers must ensure that their POS systems are connected with the FBR by the given deadline to avoid any penalties.
New Sales Tax Rates for Jewellery
Before the Finance Bill 2022-23, sales tax on jewellery was calculated at 1.5% of the value of gold and 2% of the value of diamond, along with 3% of making charges. However, this complex tax structure was simplified, and a flat rate of 17% was implemented.
From July 01, 2022, the sales tax rate for the supply of jewellery will be revised to 3%, while the tax rate for imported jewellery will be increased to 4%. However, jewellers cannot claim input tax on these rates, making it a final tax liability.
Final Tax Liability on Imported Jewellery
The tax paid on imported jewellery will be considered final, and no further tax will be charged on the sale of such jewellery. This change aims to streamline the import and export process and reduce the complications associated with tax calculations on jewellery.
Impact on Jewellers
The new tax reforms will significantly impact the jewellers in Pakistan. The mandatory sales tax registration and POS integration with FBR will increase the compliance burden and administrative costs for jewellers. Moreover, the revised sales tax rates and the non-claimable input tax will increase the tax liability for jewellers, reducing their profit margins.
The Finance Bill 2022-23 has brought significant changes in the sales tax regulations for jewellers in Pakistan. The inclusion of jewellers in tier 1 retailers, mandatory sales tax registration, POS integration with FBR, and revised sales tax rates will impact the jewellers’ compliance burden and tax liability. Jewellers must understand these changes and ensure that they comply with the new regulations to avoid penalties and legal complications.