ISLAMABAD, Sept 22: In a major policy shift, the government on Sunday extended over Rs2 billion worth of tax concessions and procedural facilitations to the business community by withdrawing several measures for documentation of economy announced in the federal budget 2013-14.

The government has withdrawn `condition of Computerised National Identity Card (CNIC), National Tax Number (NTN) [and] addresses for retailers and reduces withholding sales tax for unregistered person to oneper cent`, said an announcement made by the Finance Ministry and Federal Board of Revenue on Sunday.

FBR Chairman Tariq Bajwa told Dawn that the policy decisions approved at a meeting presided over by Finance Minister Ishaq Dar were aimed at facilitating the business community with financial impact of less than 0.1pc of the Rs2.475 trillion revenue target set for the current year. The `exact` impact of revenue loss was yet to be firmed up, he said.

Another official said the exchequer would suffer a loss of about Rs2 billion to 2.5bn ayear, but the move was clearly a setback to the government`s documentation drive.

Mr Bajwa, on the other hand, said that major initiative to document big players distributors and wholesalers would remain protected, though retailers in a couple of instances now stood exempted from documentation.

A Finance Ministry official said the relief measures would not have a financial impact sizeable enough `in view of the IMF programme`.

In one of major relief measures, the government has reduced the rate of withholding sales tax from 17pc to 1pc on purchases from unregistered persons which will not be adjustable. Before the budget 2013-14, this rate was 5pc which was increased to 17pc in case of purchases from unregistered persons.

Likewise, the government has decided that items added in the Third Schedule to the Sales Tax Act of 1990 wide the finance bill, 2013, (except for fertiliser and cement) be omitted from the schedule and subjected to 2pc extra tax in lieu of sales tax at retail stage.

The FBR chairman said the measure would have `some revenue impact, exactamount of which would be worked out`. He said given the cascading nature of revenue collection, taxpayers were allowed refund adjustments but since the major objective was documentation and not revenue collection, it was creating difficulties for the supply chain because of different prices of goods at retail stage, hence 1pc withholding sales tax had been allowed for an improved compliance.

The government has also exempted items chargeable to sales tax on retail stage from sales tax withholding regime. Mr Bajwa said the measure would have no revenue impact and it was simply removal of a tax anomaly to facilitate the business community.

Similarly, the government has reducedrate of withholding for wholesalers, dealers (including petroleum dealers) and distributors from current level of one-fifth (3.4pc) to one-tenth (1.7pc) of the applicable rate of sales tax.

The FBR chief said the measure would have nominal revenue impact but facilitate mostly petroleum dealers who had been agitating the difficulties because their profit margins were negligible but withholding tax used to be applied on their volumes.

The government waived the condition of providing CNIC, NTN and addresses of retailers under section 236H to be provided in the withholding statement under section 165 of the Income Tax Ordinance, 2001.

Mr Bajwa said the waiver would have aminor revenue impact. He agreed that a section of businesses, particularly retailers, would get a relaxation from documentation but it needed to be appreciated that a middle step to document distributors and wholesalers would be achieved.

The FBR chairman said that sales tax on fabrics had been reduced from 5pc to 3pc on the demand of textile industry because clothes were a common good used by all and sundry and was impacting everybody through higher prices. He said the measure would have `some revenue impact`.

Through another decision, commercial importers have been excluded from the sales tax withholding regime while restriction imposed under SRO 1125(I)/2011 on refunds against local supplies has beenminor revenue impact. He agreed that a section of businesses, particularly retailers, would get a relaxation from documentation but it needed to be appreciated that a middle step to document distributors and wholesalers would be achieved.

The FBR chairman said that sales tax on fabrics had been reduced from 5pc to 3pc on the demand of textile industry because clothes were a common good used by all and sundry and was impacting everybody through higher prices. He said the measure would have `some revenue impact`.

Through another decision, commercial importers have been excluded from the sales tax withholding regime while restriction imposed under SRO 1125(I)/2011 on refunds against local supplies has beendone away with to allow refunds (after prerefund scrutiny) as admissible under the relevant law.

The rate of withholding tax on goods transport vehicles under section 234 of the Income Tax Ordinance, 2001, has been reduced from Rs5 per kg of the laden weight to Rs3 per kg. This will also negatively affect revenue collection.

Mr Dar said the `government has taken these decisions to accommodate the demands of the business community despite the difficult financial situation`.

The `measures would provide relief, remove procedural anomalies and demonstrate the business-friendly approach of the PML-N government to revive the economy, he said.