The government has proposed slashing source tax on supplies of raw materials to manufacturers from 7% to 4% to reduce production costs in the proposed budget for FY2022-23.
Moreover, the source tax rate on supplies of trading goods has been reduced to 5% from 7% and on supplies of books except those by the government to 3% from 7%.
“The government is bound to ensure ease of doing business and to maintain a business-friendly environment. Varied rates of tax at source on different types of supply causes excessive effective tax burden for business people in certain cases,” said Finance Minister AHM Mustafa Kamal.
He also said that to mitigate this issue, he proposed reducing the tax rate at source on supply of trading goods from 7% to 5%, and on supply of books except government supply from 7% to 3%.
To reduce the cost of production in industries, he proposed to cut the rate of tax at source on supply of raw materials to manufacturers from 7% to 4%.