ISLAMABAD: Total tax exemptions, concessions/reduced rates, zero-rating and special tax treatments to various businesses, sectors/industries, lobbies/groups and investors have cost the government Rs 5,840.2 billion in 2024-25 against Rs3,879.2 billion in 2023-24, reflecting an increase of Rs 1,961 billion.
The Economic Survey (2024-25) released on Monday revealed that the cost of tax exemptions registered a growth of 50.55 per cent during 2024-25 as compared to tax expenditure in 2023-24.
In 2023-24, the revenue loss on account of tax exemptions was increased by 73 percent against 2022-23.
Tax exemptions, zero-rating cost kitty over Rs3.87trn
The tax-expenditure report-2025 pinpointed that sales tax exemption to petroleum products, duty concessions on imports, reduced rates of sales tax and overall sales tax exemptions on imports and local supplies were major contributor to the increased revenue loss during 2024-25.
The latest survey has not mentioned revenue loss on account of tax exemptions available to industrial units located in erstwhile tribal areas during 2024-25. This exemption will be withdrawn through the Finance Bill (2025-26) with revenue impact of nearly Rs 50 billion.
Out of the total cost of exemptions of Rs 5,840.2 billion in 2024-25, sales tax exemption (SRO.321(I)/2022) on local supplies of petroleum products caused a massive revenue loss of Rs 1,496,124 million during the current fiscal year.
The revenue loss due to sales tax exemption from imports and local supplies showed an increase of Rs 985 billion in2024-25.
The Economic Survey (2024-25) disclosed that the sales tax expenditure remained highest during 2024-25 as compared to revenue loss on account of income tax and customs duty. All kinds of sales tax exemptions/concessions caused revenue loss of Rs 4,253,472 million; followed by income tax loss of Rs 800,821 million and customs duty revenue loss of Rs 785,871 million during 2024-25.
The single-largest contributor to the surge in sales tax exemptions was the exemption from sales tax on petroleum products through statutory regulatory orders (SROs), showing a massive revenue loss of Rs1,496,124 million during 2024-25. The sales tax exemption on import of petroleum products caused revenue loss of Rs299,640 million during this period.
The survey disclosed that the fixed sales tax regime on cellular mobile phones caused a revenue loss of Rs 87,950 million in 2024-25 as compared to Rs33,057 million in 2023-24, showing an increase of Rs 54,893 million.
The Federal Board of Revenue (FBR) has suffered a revenue loss of Rs372 billion on account of sales tax exemption on imports during 2024-25 as compared to Rs214 billion during 2023-24, reflecting an increase of Rs158 billion.
Sales tax exemption on local supplies caused a revenue loss of Rs613 billion in 2024-25 as compared to Rs461 billion in 2023-24, reflecting an increase of over Rs152 billion.
The cost of income tax exemptions amounted to 800.8 billion against Rs476.9 billion, showing an increase of Rs323.9 billion and the cost of customs duty exemptions was Rs785.8 billion in 2024-25 against Rs543.5 billion in 2023-24, reflecting an increase of Rs242.3 billion.
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 Rs101 billion in 2024-25 against Rs24.374 billion in 2023-24, showing an increase of Rs76.627 billion.
The income tax exemption from special provisions of the Income Tax Ordinance has caused revenue loss of Rs52 billion during 2024-25 as compared to Rs 62.756 billion during 2023-24.
The income tax exemption from total income has revenue impact of Rs 443.445 billion during the period under review.
The income tax exemption available to the deductible allowances caused revenue loss of Rs 16.4 billion in 2024-25 against Rs 5.912 billion in 2023-24, showing an increase of Rs 10.488 billion.
The reduction in income tax rates has revenue implications of Rs 45 billion during 2024-25 as compared to Rs25.492 billion in 2023-24, showing an increase of Rs19.508 billion.
The FBR has suffered a massive revenue loss of Rs985.594 billion in 2024-25 as compared to Rs675 billion in 2023-24 due to sales tax exemptions available under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act. The loss on account of sales tax exemption (import and domestic stage) has been increased by nearly Rs985 billion.
The FBR has suffered a loss of Rs617.347 billion due to sales tax exemptions available under the Eight Schedule (Conditional Exemption/reduced rates) of the Sales Tax Act, 1990, during the period of 2024-25 against Rs357.997 billion in 2023-24. The revenue loss from conditional exemptions has been increased by Rs259.35 billion.
The total revenue loss from the zero-rating facility granted to various sectors under the Fifth Schedule of the Sales Tax Act, 1990, amounted to Rs 683.429 billion during the period under review against Rs206.053 billion in 2023-24, reflecting an increase of Rs477.376 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 Rs800.8 billion in 2024-25 against Rs476.960 billion in 2023-24, reflecting an increase of Rs323.84.
The cost of exemptions in respect of customs duty has been calculated at Rs785.9 billion in 2024-25 as compared to Rs543.521 billion in 2023-24, reflecting an increase of Rs242.379 billion.
The exemption of customs duty available under Chapter-99 (special classification provisions) of the Customs Act has caused a revenue loss of Rs 33.481 billion in 2024-25 against Rs34.864 billion in 2023-24, reflecting a decrease of Rs 1.383 billion.
The concessions under the Fifth Schedule of the Customs Act, 1969 caused a revenue loss of Rs 379.746 billion in 2024-25 against Rs190.688 billion in 2023-24, reflecting an increase of Rs189 billion.
The FBR has suffered revenue loss of Rs 61 billion in 2024-25 against Rs44.107 billion in 2023-24 on account of tariff concessions and exemptions available under Free Trade Agreements (FTAs) and the Preferential Trade Agreements (PTAs). The revenue loss has increased by Rs 17 billion.
Similarly, exemption of customs duty on the items by the automobile sector, exploration and production (E&P) companies, general concessions and the CPEC caused a loss of Rs 133.236 billion in 2024-25 against Rs146.598 billion in 2023-24, showing a decrease of Rs13.362 billion.
The export-related exemptions cost revenue loss of Rs178.435 billion during 2024-25 against Rs127.264 billion during 2023-24, reflecting a massive increase of Rs51.171 billion.
Copyright Business Recorder, 2025
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