ISLAMABAD: The Federal Board of Revenue (FBR) has revoked the 17 percent sales tax imposed last month through the mini-budget on imports by foreign diplomatic missions and United Nations (UN) agencies, according to media reports.
Pursuant to instructions circulated by the tax machinery on 4 February, January’s 17 percent sales tax imposed on President Arif Alvi, Prime Minister Imran Khan, and other senior members of the government have also been removed. Conversely, miscellaneous sales tax on food items sold at bakeries and restaurants has been retained.
The FBR instructions explained, “On the request made by the Ministry of Foreign Affairs, the issue of tax exemption on imports by diplomats, diplomatic missions, and other privileged persons has been reviewed, and consequently, sales tax shall not be collected on such imports covered under PCT headings 99.01, 99.02, and 99.06 of Chapter 99 of the First Schedule to the Customs Act, 1969.”
The tax regulator supported the sales tax withdrawal over warnings posed by the Foreign Office (FO) that other countries may take Pakistan to the International Court of Justice for imposing taxes on imports by foreign diplomatic missions and the UN agencies. It is pertinent to note that the UN Privileges and Immunities Act, 1948, protects items imported by various UN agencies, whereas the Diplomatic and Consular Privileges Act, 1972, covers goods imported by diplomats, embassies, and consulates.
The FO informed the FBR that its decision to rescind tax immunity to foreign missions and envoys violated the 1961/1972 Vienna Convention on Diplomatic Relations, and other nations could retaliate against Pakistan in the same way.
In summary, FBR’s supplementary tax measures under the Finance Bill 2021 removed the 17 percent GST imposed on goods imported under the President’s Salary, Allowances, and Privileges Act, 1975, the Prime Minister’s Salary, Allowances, and Privileges Order, 1975, the Governor’s Salary, Allowances and Privileges Order, 1975, and the Acting Governor’s (Allowance and Privileges) Order, 1978.
It also withdrew the surcharge on furniture and spare parts for official cars, river craft, and aircraft imported or acquired on credit for the President, Prime Minister, Governor, or Acting Governor, while simultaneously increasing taxes on cellular calls, and food items including bread, bakery items, children’s milk, raw materials for medications, and all forms of imported machinery.
