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Print Print 2024-05-06

Fast-track solar PV projects by Arab countries: FBR asked to amend sales tax, income tax laws

  • The government is actively working towards the development of solar PV projects utilizing the G2G mode
Published May 6, 2024

ISLAMABAD: The Private Power & Infrastructure Board (PPIB) has asked Federal Board of Revenue (FBR) to amend Sales Tax Act, 1990, and Income Tax Ordinance, 2001, enabling timely development of the planned fast track solar PV projects by Arab countries, well informed sources told Business Recorder.

According to PPIB, in order to ensure the GOP’s policy objectives of energy security, affordability of electricity, environmental protection, and sustainable development, the GOP envisions to deploy solar power on a fast-track basis to eventually complement and/or substitute the expensive imported fossil fuels currently being used for power generation.

This not only will ensure savings of foreign reserves that are being incurred on import of expensive fossil fuels for power generation but will also help in provision of affordable electricity supply to consumers and pave the way for a sustainable power sector in the long run.

Security concerns: Saudi firm says unable to sign pacts on solar projects

For this purpose, the Federal Cabinet on October 18, 2022, approved the Framework Guidelines for Fast-Track Solar PV Initiatives 2022.

Pursuant to the Framework Guidelines, large-scale solar PV projects will be developed on IPP mode through competitive bidding or under G2G Framework. The GOP, through SIFC, has already received interest from the Governments of the Kingdom of Saudi Arabia (KSA), United Arab Emirates (UAE), and Kuwait for the development of RE projects in Pakistan under the G2G mode.

The government is actively working towards the development of solar PV projects utilizing the G2G mode.

The Framework Guidelines provide several fiscal and financial incentives to the IPPS. Section 2.1.2(xv) of the Framework Guidelines which states that: “(xiv) All machinery, equipment and other related goods and materials required for deployment of Solar PV projects shall be exempted from all import related duties and taxes. If required necessary amendments in the relevant laws will be initiated by FBR.”

Furthermore, Section 2.1.2(xv) of the Framework Guidelines states that: “(XV) Profits and gains derived from sale of electricity by an IPP from an electric power generation project shall be subject to 15% income tax for the term of the project.”

Managing Director PPIB, Shah Jahan Mirza, in his letter to Chairman FBR stated that the sales tax exemption on imports of machinery, equipment and spares for Alternative and Renewable Energy (ARE) projects, that are being processed after January 15, 2022, have been withdrawn under the Sales Tax Act, 2022.

Additionally, amendments to the Income Tax Ordinance 2001, made through the Finance (Supplementary) Act, 2022, have eliminated income tax exemptions. Consequently, these projects are now subject to both sales tax and the standard corporate income tax rate, currently set at 29%, which exceeds the concessionary rate outlined in the Framework,“ Mirza added.

PPIB maintains that to enable IPPs to benefit from the exemption on imports of machinery, equipment, and spares, as well as the reduced income tax rate of 15% on profits from solar PV projects, as approved by the Federal Cabinet under the Framework Guidelines, amendments to the relevant legislations are necessary.

After sharing the background of the case, PPIB requested FBR that considering the decision of the Federal Cabinet, necessary action be taken in the matter at the earliest for making the requisite amendments to the Sales Tax Act, 1990, and Income Tax Ordinance, 2001, enabling timely development of the planned fast track solar PV projects.

Copyright Business Recorder, 2024

Comments

Comments are closed.

KU May 06, 2024 08:19am
"Objectives of energy security, affordable electricity, ......... sustainable development", and you need to ask or beg FBR? Corrupt protecting their interests while country is in misery, wake-up.
thumb_up Recommended (0)
Shahzad May 06, 2024 10:49am
What a Joke? On one hand, Government is discouraging Individuals who have invested their hard-earned money in Solar Panels by reducing purchase price. And on the other hand, inviting big Corporates and are giving them massive incentives to install big projects. Why are there two contrary policies? Time to approach Honorable Courts to look into the matter deeply. Otherwise, people will again in the same Mess which is created due to blindfolded agreements previously done with IPPs.
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wz May 06, 2024 11:02am
we already have excess capacity for which the consumer is paying. we dont need large scale solar plants added to our grid.
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wz May 06, 2024 11:02am
make the rate of industrial and commercial electricity same as the price that the govt is paying to IPP. Make it cheaper. Industry will flourish.
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Maqbool May 06, 2024 11:03am
Like our people who are the owners of this country, if any Solar Tax or Net metering , comes up in the Budget, that it’ll be equally applicable to the Arabs and any special tax incentives to the people
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Naeemullah Shah May 06, 2024 12:33pm
For Heaven’s sake, no more IPPs. Give incentives to people to install their own Solar Power domestic systems.
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Fatima May 06, 2024 01:30pm
@wz, need to add distribution , losses, theft and fraud
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Tariq Qurashi May 07, 2024 09:42am
Is our normal process a "Slow Track"? Everything should be "Fast Track" if you want to encourage investment. Why encourage Solar projects while at the same time discouraging domestic solar power?
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Chawla.i May 07, 2024 12:17pm
Government doesn't have a clue .. Policies r made by beareaucrates whom have no expertese nor professional guidance...result O Gdluck Pakistan
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