Industrial undertakings: Minimum tax payable despite exemption under Economic Reforms Act

LAHORE: Minimum tax is payable by the industrial undertakings despite enjoying exemption under the Economic Reforms Act, said income tax department sources.

They said a number of industrial units set up after the introduction of economic reforms law, being assessed for minimum tax, believe that they are enjoying exemption from tax under the Economic Reforms Act. Especially, most of them avoid to pay minimum tax on the ground that their industrial undertakings were set up after the announcement of economic reforms law.

However, the departmental sources have pointed out that minimum tax on income was introduced to the Income Tax Ordinance much after the clause relevant to tax exemption, therefore, it overrode any tax exemption granted prior to it.

It may be noted that the exemption clause of the Ordinance maintains that profits and gains derived by an assessee from an industrial undertaking set up between the first day of January, 1987, and the 13th day of June, would be exempted for a period of 10 years. However, since it was followed by the introduction of clause related to minimum tax on income, therefore, the exemption clause was non obstante which means minimum tax was leviable despite the exemption.

So far as setting up of the industrial units after the economic reforms law is concerned, they said the date of setting up of the plants by the taxpayers was irrelevant and what was relevant was the date of the announcement, promulgation and implementation of the fiscal incentive by the government.

According to the sources, the purpose of the law is to provide legal protection to economic reforms that have already been introduced and are in the process of being introduced in order to create confidence in the establishment and continuity of liberal economic environment under these reforms.

They said the economic reforms protected under the law are the ones that were announced, promulgated or implemented by the government. It also includes fiscal incentives for industrialization already introduced for a specific term and maintains that they shall not be altered to the disadvantage of taxpayers.

Copyright Business Recorder, 2024