ISLAMABAD: The total tax exemptions and concessions to various businesses, sectors/industries, lobbies/ groups and investors have cost the government Rs 1,314.3 billion during the fiscal year 2020-21 against Rs 1,149.95 billion in 2019-20, reflecting an increase of Rs 164.35 billion.
The cost of tax exemptions registered a growth of 14.36 percent during 2020-21 as compared to tax expenditure in 2019-20.
The Economic Survey 2020-21 released here on Thursday disclosed that single-largest contributor to the surge in sales tax exemptions was the exemption from sales tax on imports, showing a massive revenue loss of Rs173.808 billion during 2020-21.
Sales tax exemption on local supplies caused revenue loss of Rs 156.134 billion against Rs 54.871 billion, reflecting a major decrease of Rs 192.429 billion. This has been followed by a revenue loss of Rs 267.115 billion from exemption from total income during 2020-21.
The cost of sales tax exemptions totalled at Rs 578.456 billion in 2020-21 against Rs 518.814 billion in 2019-20, reflecting an increase of Rs 59.642 billion; income tax, Rs 448.046 billion against Rs 378.03 billion, showing an increase of Rs 70.016 billion, and cost of customs duty exemptions was Rs 287.771 billion in 2020-21 against Rs 253.111 billion in 2019-20, reflecting an increase of Rs 34.66 billion.
Within the category of direct taxes, the cost of income tax exemption has been increased by Rs70.016 billion in 2020-21, when compared with the previous year.
The Economic Survey has not mentioned revenue loss on account of exempt business income granted to independent power producers (IPPs).
Similarly, the survey has not mentioned any revenue loss from capital gains.
The accumulative revenue loss on account of tax credits amounted to Rs 105.342 billion in 2020-21 against Rs 104.498 billion in 2019-20, showing an increase of Rs 0.844 billion.
This year, the government has not specified details of revenue loss on account of tax credits for charitable donations, tax credit under Section 100C, and revenue loss on account of tax credit for investment in shares and insurance under Section 62 of the Income Tax Ordinance.
The FBR has suffered massive revenue loss of Rs329.942 billion in 2020-21 due to sales tax exemptions available under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act.
Last year, the revenue loss was Rs301 billion, which increased to Rs329.942 on account of sales tax exemptions.
The FBR has suffered a loss of around Rs208 billion due to sales tax exemptions available under the Eight Schedule (Conditional Exemption) of the Sales Tax Act, 1990, during the period of 2020-21 against Rs118.137 billion in 2019-20.
The revenue loss from conditional exemptions has been increased by Rs 90 billion.
The exemption of sales tax on cellular mobile phones under Ninth Schedule of the Sales Tax Act, 1990, resulted in a revenue loss of Rs 27.096 billion during 2020-21 against Rs 23.154 billion in 2019-20, reflecting an increase of Rs 3.942 billion.
The total revenue loss from zero-rating facility granted to various sectors under Fifth Schedule of the Sales Tax Act, 1990, amounted to Rs 12.887 billion during the period under review against Rs13.671 billion in 2019-20, reflecting a negative growth of Rs 0.784 billion.
The FBR has not specified any revenue loss to the exemptions within the federal excise regime, reflecting no loss occurred on this account.
The cost of income tax exemptions was considerably enhanced from Rs378.026 billion in 2019-20 to Rs448.046 billion in 2020-21.
The revenue loss due to exemption to export of IT services during 2020-21 has not been mentioned in the survey.
The cost of exemptions in respect of customs duty has been calculated at Rs 287.771 billion for 2020-21 against Rs 253.111 billion for 2019-20, reflecting an increase of Rs 34.66 billion.
The exemption of customs duty available under Chapter-99 (special classification provisions) of the Customs Act has caused a revenue loss of Rs 12.645 billion during 2020-21.
The concessions under Fifth Schedule of the Customs Act, 1969 caused revenue loss of Rs 137.418 billion in 2020-21 as compared to Rs87.859 billion in 2019-20, reflecting an increase of Rs 49.559 billion.
Copyright Business Recorder, 2021