Draft VAT law submitted to parliament A draft law submitted to parliament by the government proposes a unified rate of 15 percent for the Value Added Tax (VAT) to replace the existing 16 per cent General Sales Tax (GST) from July 1, 2010.

In accordance with recently- evolved consensus on the seventh NFC Award, the VAT law proposes abolition of the Federal Excise Duty (FED) on all services. Currently, the FBR is charging fixed FED on certain services. According to the new consensus among the provinces and the Centre, the provincial assemblies are authorised to impose VAT on services as this subject falls under the jurisdiction of federating units in accordance with the 1973 Constitution while VAT on goods falls under the ambit of the federal government. The VAT law further says that the exemption of threshold for retailers be enhanced from Rs 5 million to Rs 7.5 million under the VAT. All retailers above Rs 7.5 million ceiling will automatically come under the VAT net from the next fiscal year on which the government might face tough resistance from retailers. The facility of across-the- board input tax credit shall be available to avoid escape from tax. The import of services has been subjected to tax “reverse charges” as per international practice.