KARACHI: The Federal Board of Revenue (FBR) has cancelled the tax exemption certificate earlier granted to Engro Fertilizer Limited for the period of July to December 2025. The decision, taken by the Large Taxpayers Office (LTO) Karachi, has rattled Pakistan’s fertilizer sector and triggered concerns about policy consistency and investor confidence.
The exemption certificate had been issued for Tax Year 2026, allowing Engro Fertilizer to withhold certain taxes. However, FBR has now revoked the facility, citing non-fulfillment of advance tax obligations under Section 153(1)(a) of the Income Tax Ordinance, 2001.
A tax consultant confirmed that the company is now liable to deduct and deposit taxes previously exempted. “This withdrawal has immediate financial implications and creates an environment of uncertainty for future planning,” the consultant added.
According to sources within LTO Karachi, the revocation was based on an internal assessment that revealed Engro Fertilizer had not paid sufficient advance tax dues. “Compliance with advance tax requirements is essential to sustain such exemptions,” an official said.
The move has provoked sharp criticism from industry professionals and tax experts. They argue that the FBR is unfairly targeting documented sectors, while the informal economy remains largely unregulated. “It sends the wrong signal when a company with transparent operations is penalized, while tax evaders face little scrutiny,” said a senior tax advisor.
Industry players are now worried about a ripple effect on investor confidence. Several consultants reportedly plan to shift operations to tax-friendly countries like the UAE and Saudi Arabia, citing increasingly unpredictable fiscal policies in Pakistan.
Further aggravating the situation, allegations have surfaced that FBR has pre-collected large sums of advance tax intended for FY2026 in order to inflate the revenue numbers for the previous fiscal year. Critics say such tactics undermine the credibility of tax administration and reflect poor governance.
Business groups have urged the Ministry of Finance to immediately intervene and reinstate consistent exemption policies. “Fertilizer is a backbone of our agricultural sector. We need clear and stable tax rules to ensure food security and economic resilience,” said one industry representative.
As pressure mounts, stakeholders are calling for a comprehensive review of current tax strategies, demanding that FBR broaden its efforts to include informal sectors rather than disproportionately targeting compliant businesses.
