The Federal Board of Revenue (FBR) has
clarified sales tax liability of ship breakers with the direction that
discharge of sales tax liability on local supply of re-rollable scrap is to be
calculated @ 70.5 percent of total Least Displacement Tonnage (LDT) of the ship
imported for breaking. In this regard, the FBR has issued a sales tax
clarification to the field formations here on Thursday regarding clarification
regarding sales tax liability of ship breakers.
According to the FBR, Board vide C.No. 3(5)
ST-L&P/2007(Pt)124944-R, dated 28.09.2016, had issued clarification under
the signatures of Second Secretary (ST&FE Policy), regarding sales tax
liability of ship breakers which read as under:
"I am directed to refer to your letter
No. Nil, dated 16.09.2016, on the subject and to say that under sub-rule (4) of
rule 58H of the Sales Tax Special Procedure Rules, 2007 (amended from time to
time), ship breakers shall only pay sales tax at the rate of eight thousand
rupees per metric ton of re-rollable scrap supplied by them at the time of
import. The quantity of re-rollable scrap shall constitute 70.5% of the total
LDT of the ship imported for breaking."
It has been brought to the notice of the
Board by filed formations that insertion of the word "only" in the
clarification gives the impression that payment of sales tax at the rate
prescribed in sub-rule (4) of rule 58H of the Sales Tax Special Procedure
Rules, 2007 calculated at 70.5% of the total LDT of the ship imported for
breaking constitutes final discharge of the sales tax liability ie in respect
of local supply of re-rollable scrap as well as on other materials obtained
during the process of ship breaking, the FBR said.
Accordingly, in supersession of Board's
clarification C.No.3(5)ST-L&P/2007 (Pt)-124944-R, dated 28.09.2016, it is
hereby clarified that sales tax liability of a ship breaker at the rates
prescribed in sub-rule (4) of rule 58H is the discharge of sales tax liability
on local supply of re-rollable scrap which is to be calculated @ 70.5% of total
LDT of the ship imported for breaking as had been clearly laid down in sub-rule
(4) of rule 58H before its substitution vide SRO 583(1)/2017, dated 01.07.2017.
This discharge of sales tax liability does not cover sales tax liability on
account of other materials obtained during the course of ship breaking and
subsequently supplied.
It may be further noted that w.e.f July 1,
2017 through substitution of sub-rule (4) of rule 58H vide SRO 583(1)/2017,
dated 01.07.2017, liability of a ship breaker has been made final to be
calculated at eighty percent, in case of oil tankers and gas carriers and at
72.5% for other vessels of the total LDT of the ship imported for breaking and discharge
of sales tax liability @ 8500 PMT includes sales tax liability on other
materials besides re-rollable scrap obtained during the process of ship
breaking and subsequently supplied.
Source: business recorder. 01 December 2017
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