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GST: Small industry's point of view

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It would have a direct bearing on the tens of millions of people across the country

Syed M. Aslam
Apr 10 - 16, 2000

The government can collect a revenue of Rs 35 billion by levying, and implementing, a simplified turnover tax instead of the General Sales Tax (GST) which has drawn a strong resistance from the retailers during last few years.

According to a survey conducted by Pakistan Small Chamber of Commerce and Cottage Industries (PSCCI) there are some 1.7 million retailers in Pakistan whose annual turnover exceeds Rs one million. PSCCI'S chairman Bashir Miandad favours replacing the GST with Simplified Turnover Tax, the salient feature of which is to exempt retailers of Rs one million or less turnover, exempt from the tax and to levy a tax of 0.5 to 1 per cent on the 1.7 million retailers whose annual turnover is in excess of Rs one million.

According to PSCCI survey there are some one million retailers in the country whose annual turnover is between Rs one million to Rs 2.5 million. In addition, there are some 500,000 retailers whose annual turnover is over Rs 5 million and 100,000 retailers whose annual turnover is in excess of Rs 10 million and 20 million each. See the table.

Talking to PAGE, Bashir said replacing the GST by the Simplified Turnover Tax and by establishing the category will help solve tax evading as it would help bring an increased number of retailers into the tax net. This would happen as the proposed scheme would include all retailers whose annual turnover is over Rs one million into the tax net by abolishing the previous category of including only the big retailers with an annual turnover of Rs 5 million and above.

The proposed tax, Bashir said, would not only bring more retailers into the tax net by abolishing the previous category of only those retailers to pay the GST whose annual turnover exceeds Rs 5 million on the one hand and by making it more acceptable to the retailers by reducing the tax rate to the proposed 0.5 to one per cent on the other hand.

PSCCI has proposed that the Simplified Turnover Tax would allow the retailers to pay the tax on self-assessment basis without documentation within period of 45 days and/or on quarterly basis. However, the proposed tax should be given the legal coverage by amending the Sales Tax Act 1990. It also proposed to establish a separate department in Central Board of Revenue, the primary tax collecting agency of the country, to handle and solve the problems related to the collection and implementation of the Simplified Turnover Tax.

Similarly, a separate Tax Collection Account of revenue collected from the tax should be maintained to ascertain the exact figure of tax collected under the proposed scheme. Attributing self-assessment the essence of success for the launching of Self-Assessment Income Tax Scheme last year on , the PSCCI feels that it would play a similar role in the success of the Simplified Turnover Tax proposed by it.

The government's hard talks about its resolve to impose the GST at all levels and the recent history of traders strong protest and agitation against it calls for the meaningful and amicable resolve of the issue. Strangely enough, the consumers who would have to pay the GST ultimately have failed to raise a concerted voice for whatever reason against, or in favour, of the imposition of the GST. The absence of consumer protection groups or lobbies have turned the GST issue into a conflict between the government and the retailers, the majority of which oppose its implementation for fear of documentation of their business in a high smuggling-prone and tax-evading economy like Pakistan. The consumers concerns to formulate the imposition and implementation of GST should be included while dealing with this sensitive issue as its imposition and implementation of GST, or any other similar scheme under a different name, would have a direct bearing on the tens of millions of people across the country.

Allocation of Land for Cottage Industry

Bashir informed PAGE that an area of 50 acres have been approved by the Sindh Ministry for Industry and Labour for the establishment of cottage industry. The area owned by the SITE (Sindh Industrial and Trading Estate) to be called SITE 2 will located adjacent to the North Karachi Industrial Area along the Karachi-Hyderabad Super Highway.

Bashir said that the per acre cost of the land in the proposed SITE 2 area designated for the cottage industry is Rs one million per acre but the Ministry of Industry and labour Sindh is negotiating for reduced prices by making it a government-to-government land transfer. He said that the proposed area would offer land in four categories — 150, 250, 500 and 1,000 square yards to accommodate all sizes of cottage industries as per the need of an individual unit. It would be the first time ever that cottage industry anywhere in the country would be allocated a dedicated and purpose-developed site to cater to its distinct needs, he added.

No. of Retailers

Annual Turnover

Total Tax Collection @ 0.5%


Upto Rs 2,500,000

Rs 12.5 billion


Upto Rs 5,000,000

Rs 12.5 billion


Upto Rs 10,000,000

Rs 5 billion


Upto Rs 20,000,000

Rs 10 billion


Net Revenue

Rs 35 billion