ISLAMABAD: The federal government on Friday imposed sales tax in two slabs on domestic sales of finished and unfinished textile and leather products to generate revenue for the cash-starved country.

The move is aimed at generating revenue on the domestic sales of these products. On Friday, the FBR issued a sales tax notification by amending the SRO1125 of 2011 to introduce two different slabs on textile and leather products domestic sales.

Two per cent sales tax will be levied on un-finished products of textile and leather products; while in case of finished products of these sectors, the rate of sales tax will be five per cent.

The first attempt to introduce tax on domestic sales of the five export oriented sectors was made in November 2011 by introducing two sales tax slabs (4pc and 6pc) on these five sectors.

On strong resistance, the government later introduced a uniform rate of five per cent tax from Jan 1, 2012. In March 2013, the government reduced the rate of sales tax from 5 to 2pc on supplies in the domestic market. Sales of textile in domestic market is estimatied at Rs300 billion. The introduction of these two slabs will easily fetch substantial revenue.

The rate of sales tax for commercial importers on import of goods usable as industrial input will be taxed at the rate of 17 percent instead of earlier two per cent.