Power Policy 2002: FBR rejects EDB claim

The Federal Board of Revenue has rejected the Engineering Development Board''s claim that the tax authorities have not fully implemented the Power Policy 2002, on import of plant, machinery, equipment for power generation projects.
Sources told Business Recorder on Saturday that the EDB has received the comments of the FBR on the National Engineering Exports Development Strategy (NEEDS) developed by the EDB. According to the EDB proposal, there was need for implementing Power Policy 2002, in letter and spirit, with no duty exemption allowed on import of locally manufactured goods as provided in the relevant customs exemption notification. Both the PPIB and the FBR have to ensure proper implementation of the Power Policy.
The EDB has received the FBR response which says that the Power Policy, 2002 envisaged, inter-alia, a concessionary rate of 5 percent customs duty and complete exemption of sales tax for power generation projects. However, the scope of exemption is restricted to those items, which are not manufactured locally. These concessions/exemptions are notified vide SRO 575(I)/06, dated June 5, 2006.
In the year 2008-9, the Ministry of Water and Power moved a Summary for the Economic Co-ordination Committee (ECC) of the Cabinet wherein it was proposed that the projects which have achieved Financial Close or expected to achieve financial close within March, 2008 may be allowed to import cooling towers, heat recovery steam generators and feed water pumps after paying 5 percent customs duty irrespective of the fact that the same are manufactured locally or otherwise, as one time relaxation. The same was approved by the ECC and in pursuance of the ECC decision, SRO 412 (I)/2008, dated April 30, 2008 was issued, FBR response added.
The EDB had informed the FBR that interestingly, to encourage the setting up of new facilities in sectors such as retail chains by foreign companies, poultry and horticulture, logistics and warehousing etc the imported infrastructure (even prefabricated buildings) in the finished form has been allowed free of Import Duty, WHIT and Sales Tax. On the other hand, the local manufacturers are liable to pay all the duties and taxes on import of inputs as well as on local supplies in terms of Customs Exemption SRO 575(I)/2006. In order to leverage the local industry''s participation and sales to the public sector entities, government did issued regulations vide a notification SRO 827(1)/2001 dated 03-12-2001. The said notification is neither honoured nor is implemented or pursued by various government departments, despite it being in force. Meanwhile, the local industry is faced to sit with large idle capacities, the EDB added.