KARACHI - The domestic Sales Tax collection during the first five months of FY09 has increased massively by 267.4 per cent despite massive cut in the world oil prices. The sales tax collection from POL products has surged to Rs 46.7 billion from July-Nov FY09 as against a paltry collection of Rs 12.70 billion sales tax from this sector during the corresponding period of FY08. The total share of POL in sales tax stands around 49.7 per cent. This ratio was 20.8 per cent. The other major contributors that have shown significant growth are natural gas and electrical energy Rs 6.10 billion and Rs 2.5 billion is the amount generated by these two sectors respectively. The natural gas shows growth up to 20.3 pc in sales tax while Rs. 5.1 billion was collected during the same period last year. There is a sharp growth in sales tax collection that has been witnessed in the electrical energy sector, as it shows 188.8 % growth in July-November FY 09. During this financial year, the amount collected from this sector is Rs. 2.5 billion. This amount was Rs. 0.9 billion during the same period last year. It is observed that the indirect tax receipts surpassed the revenue target set for Jul-Nov FY09 with a wide margin of Rs 22.2 billion. This has offset the revenue shortfall in direct taxes for the period. In absolute terms, indirect taxes increased to Rs 290.8 billion during Jul-Nov FY09 against Rs 226.7 billion in the corresponding period last year, showing a growth of 28.3 percent. Relatively strong growth of indirect taxes along with the deceleration in direct taxes led to decline in share of direct taxes in total taxes. This exceptional growth in domestic share of indirect taxes during Jul-Nov FY09 is explained, in large part, by strong inflationary pressures in the economy, particularly the energy sector. It is worth noting that the Federal Board of Revenue (FBR) surpassed its revenue target of Rs. 413.2 billion for July-Nov FY09, despite a shortfall of Rs 12.3 billion in direct tax collections. This was made possible by above-target collection for all three components of indirect taxes. As a result, indirect taxes reached Rs 290.8 billion during Jul-Nov FYO9; up by 28.3 percent YoY compared to a 13.4 percent YoY rise in the corresponding period last year. It is worth mentioning that a strong growth in indirect taxes had been witnessed during the first quarter of the FY09. But this should not be taken as an indication of higher tax buoyancy since a significant part of this increase was contributed by a rise in international commodity prices and steep depreciation of the Pakistani rupee. With recent declines in POL product prices and presence of considerable scope of further downward adjustment, the tax base, and, consequently, the tax receipts, could decelerate in remaining months of FYO9. Furthermore, the deceleration in direct tax collection could intensify with possible declines in withholding tax receipts from contracts as a result of large cuts in development expenditures. Gross Sales Tax (Dometic): Top 10 contributors (Billion Rs) July-November Growth % Share in total FY08 FY09 FY08 FY09 POL Products 12.7 46.7 267.4 20.8 49.7 Telecommunications 18.2 19.1 4.8 29.8 20.3 Natural Gas 5.1 6.1 20.3 8.3 6.5 Sugar 4.2 3.9 -7.4 6.8 4.1 Cigarettes 2.9 3.3 12.8 4.7 3.5 Electrical Energy 0.9 2.5 188.8 1.4 2.6 Services 2.5 2.4 -2.1 4.1 2.6 Aerated waters/beverages1.9 1.8 -5.5 3.2 1.9 Cement 1.4 1.3 -4.1 2.3 1.4 Tea 1.1 1.0 -5.2 1.8 1.1 Others 10.3 5.8 -43.4 16.9 6.2 Grand total 61.1 93.9 53.7 100.00 100.00 Source: FBR, Islamabad