ISLAMABAD: The federal government granted Rs415.75 billion worth of tax exemptions in the fiscal year 2016-17 as compared with Rs394.59 billion exemptions of previous year, showing 5.36 percent increase.
Cost of exemption and concessions in sales tax has been increased by 20.6 percent to Rs250 billion during 2016/2017 as compared with Rs207 billion in the last fiscal year.
Similarly, the duty exemption during the fiscal year 2016-17 has been increased by 26 percent to Rs151.68 billion from previous year’s Rs119.99 billion.
However, the exemptions and concessions in direct taxes have declined drastically 79 percent to Rs14 billion from previous year’s of Rs67.3 billion.
CUSTOMS EXEMPTIONS
The customs exemptions surged to Rs151.7 billion in 2016-17 from Rs120b in the preceding year, an increase of 26pc. The increase was mostly on account of preferential trade agreements (PTAs), especially with China that Pakistan signed in the recent past and other duty exemptions. Maximum exemptions were given in customs duties available on imports from China under free trade agreement (FTA), which climbed to Rs31.6 billion in the ongoing fiscal year from Rs30.577b of last year, an increase of 3pc.
Duty exemptions on imports from South Asian Association for Regional Cooperation and Economic Cooperation Organisation countries stood at Rs1.1 billion this year as against Rs247m of last year, FTA with Sri Lanka at Rs2.5b this year against Rs1.2 billion last year.
Other major beneficiaries of these exemptions were the original equipment manufacturers (OEMs) of the automotive sector and vendors who availed Rs21.8 billion exemptions in 2016-17.
INCOME TAX EXEMPTIONS
The overall income tax exemptions fell to Rs14 billion in 2016-17 from Rs67.3 billion in 2015-16 in the previous year, a decline of Rs53.3 billion. The break-up of estimated revenue loss under the head of income tax expenditures revealed that Rs12 billion loss occurred due to exemptions given to corporate tax rates and Rs500 million as relief on education expense. Around Rs300 million losses occurred as tax credit for establishing new industry under section 65D of the Ordinance. Around Rs200 million losses occurred due to Tax credit for expansion of existing plant or new project under section 65E of the Ordinance. Tax exemption worth Rs100 million was given as extending exemption to export of IT services under clause (133) of Part-I of the Second Schedule.
SALES TAX EXEMPTIONS
According to the survey, sales tax exemptions were provided under the export facilitation schemes and general and sector specific SROs. One SRO-based sales tax exemption stood at Rs50.4 billion in 2016-17. This exemption was mentioned because of five export sectors – leather, textile, carpets, surgical and sports goods. The cost of sales tax exemptions because of import and local supply placed under the 5th schedule of the income tax stood at Rs25.8 billion in 2016-17 as against Rs23.6 billion of last year.
And the cost of exemptions on import and local supply of items placed under the 6th schedule arrived at Rs156.9b this year as against Rs128.9b of last year. The cost of exemptions on the import of products under 8th schedule stood at Rs16.4 billion this year as against Rs11.4 billion last year
