Freight of domestic shipping lines: Tarin says will ensure ST fully refundable, adjustable

ISLAMABAD: Finance Minister, Senator Shaukat Tarin has pledged to make sales tax refundable/ adjustable on freight of domestic shipping lines, well informed sources told Business Recorder.

The issue of freight charges was raised by the Minister for Maritime Affairs (MoMA), Ali Zaidi, at a meeting of Federal Cabinet on December 30, 2021, when the agenda included discussion on Finance (Supplementary) Bill, 2021 Taxation Proposals, prepared to meet ‘prior conditions’ of IMF.

The Minister for Maritime Affairs apprised the Cabinet that Pakistan (private & public sectors) spends around $6 billion as freight charges on foreign shipping lines as Pakistan lacked the required number of local vessels, which could be enhanced by incentivizing local shipping industry, and that ultimately could enable Pakistan to save $6 billion in foreign exchange.

Zaidi, sources revealed, argued that despite its inclusion in the approved Maritime Policy which provides for procurement on Freight on Board (FoB) basis by the public sector using Pakistani flag carriers who charge freight in Pakistani rupees, and nothing has been done so far.

He requested that the exemption be included in the Finance (supplementary) Bill, 2021.

Export growth dependent upon sales tax refunds

The Minister for Finance clarified that outright exemption could not be granted but he would look into making the sales tax on freight is refundable/ adjustable at an appropriate time.

Federal Board of Revenue (FBR) informed the Cabinet that it was committed to achieving tax reforms with the assistance of ‘development partners’. The basic purpose of reforms was to follow the ideal principles of taxation and remove distortions in tax system.

The Cabinet was also informed that the growth was broad-based and corporate sector had posted a record profitability of Rs 929 billion in FY2l, up from Rs 587 billion in 2018.

Overall, 247 per cent growth in companies, and incorporation was witnessed (69,380 companies during July-2019 to Dec-21 reported, compared to 79,996 companies in the last three years of PML-N government). Sector wise, growth witnessed from 2018-21 in real estate was 494 per cent), IT Sector 194 per cent & Tourism 136 per cent).

First time in the last ten years, exports indicators were looking promising and the average monthly exports were now touching $3 billion mark from $ 2 billion in tenure of the previous government. IT sector exports had doubled from previous government’s time and expected to reach $3.5 billion to $ 4 billion - up by 300% by the end of this fiscal year.

Remittances had reached $ 29.4 billion, up from $ 23.1 billion a year earlier and forecast to reach $ 32 billion this year.

As per analysis, the 80-85 per cent of import surge was due to the price effect and 25-20 per cent is quantitative in line with economic growth.

Copyright Business Recorder, 2021