ISLAMABAD: The Federal Board of Revenue (FBR) has incurred millions of rupees loss due to tax exemptions granted to the Federally Administered Tribal Area (FATA) under different heads, sources said.
The income tax, sales tax and customs duty exemptions have been granted by different governments in different tenures, they added.
“The imports worth Rs 66 million involving exemption of customs duty to the tune of Rs 2 million have been affected from July 2016 to February, 2017 alone,” sources at the FBR told Customs Today.
The sources said that the profits or gains derived by taxpayers from Khyber Pakhtunkhwa, FATA and Provincially Administered Tribal Area (PATA), affected by war on terror, were granted tax exemptions for three year starting from the tax year 2010 through insertion of clause 126-F, Part-I of the Second Schedule to the Income Tax Ordinance. Under this concession, the sources added that people residing in these areas were exempted from income tax which casts negative impact on the revenue collection of the FBR.
Moreover, the sources said that Vide Finance Act, 2015, clause (126L) of Part I of Second Schedule to the Income Tax Ordinance, 2001 had been added, whereby profits and gains derived by a taxpayer, from an industrial undertaking set up between July 2015 and June, 2018, in the whole of Khyber Pakhtunkhwa including FATA, had been granted exemption for a period of five years, starting from the day of commencement of their commercial operations. This concession has also immensely affected the revenue collection of the FBR in the head of income and sales tax.
“The aforesaid industrial undertakings have also been granted exemption from payment of minimum tax on their turnover under clause (11A)(xxv) of Part IV of the Second Schedule” the sources added, saying that profits and gains derived by a taxpayer from fruit processing and preservation unit set up in certain backward areas, including Malakand Division and FATA had also been exempted from income tax with effect from July 2014 until June 2017 under clause 126-H.
“Exemption from sales tax to plant, machinery and equipment imported for setting up industries in FATA up to June, 2019 has been provided under S. No. 116 of Table-1 of Sixth Schedule to the Sales Tax Act, 1990 subject to the same conditions and procedure as are applicable for import of such plant, machinery and equipment under the Customs Act, 1969 (IV of 1969)” the sources maintained.
Similarly, the source observed that in order to promote industrialization, job creation and economic uplift of the less developed regions, exemption of customs duty had been allowed on import of plant, machinery and equipment imported during the period commencing from July 2014-June 2019 for setting up industries in FATA vide Sr. No. 26 of Fifth Schedule to the Customs Act, 1969.
“All these tax exemptions have badly affected the revenue collection of FBR which at presently is short of almost Rs 200 billion from the revenue target” the source concluded.
