Industries in tribal areas: Fate of tax exemptions to be decided in FY24 budget

ISLAMABAD: The government, through Finance Bill 2023, will take final decision on the extension in tax exemptions granted to the industrial units of iron/ steel, plastics, ghee, textile, and other sectors located in the erstwhile Federally Administered Tribal Areas/ Provincially Administered Tribal Areas.

Sources told Business Recorder that the review of the tax exemption, to be expired on June 30, 2023, is under way during the ongoing budget preparation exercise for 2023-24. It is a major policy decision to be taken by the budget makers to decide whether to continue the said exemptions to be expired on June 30, 2023.

The sales tax exemption would also expire on the supplies of electricity from June 30, 2023, to all residential and commercial consumers in tribal areas except steel and ghee or cooking oil industries.

Steel, plastic, ghee, other sectors: Tribal area tax exemptions expire on June

At the time of the merger of the erstwhile Federally Administered Tribal Areas/ Provincially Administered Tribal Areas in Khyber-Pakhtunkhwa in 2018, tax exemptions had been granted to these areas for five years up to June 30, 2023. Currently, several industrial units located in these areas are manufacturing different goods including iron and steel, plastic, ghee, textile, etc.

It allowed the use of non-customs paid vehicles in erstwhile FATA/ PATA for a period of five years ending on June 30, 2023. However, these vehicles would not be allowed to cross over to other areas of the country. On the expiry of the five years’ relaxation period (June 30, 2023), the vehicles would be regularised on payment of leviable duty and taxes.

These units import raw materials through the seaport at Karachi without payment of sales tax and income tax. However, these units are required to sell the finished goods only in the newly-merged districts of erstwhile Fata/ Pata and not in the tariff areas/ other districts of the province or in other provinces.

In a recent meeting of the Senate Standing Committee on Finance, Minister of State for Finance Aisha Ghaus Pasha, Thursday, categorically conveyed to the steel and ghee/ cooking industries in erstwhile tribal areas to justify their demand of tax exemptions, which would create distortions for taxpaying units in Pakistan.

The demand of exemptions should be clearly justified and distortions should not be created due to the proposed sales tax and excise duty exemption to the steel and ghee/ cooking oil units in the tribal areas. “We do not want to create any distortion in the taxation system. If you justify these exemptions, the government would be ready to consider the same,” she added.

Copyright Business Recorder, 2023