Refineries’ upgradation: Sales tax waived on capital goods imports
ISLAMABAD: The government has granted an exemption of sales tax on import of capital goods for upgradation and overhaul of existing refineries as part of a package of sales tax relief measures announced in the Finance Bill 2026-27 aimed at supporting key sectors of the economy and promoting investment.
The Finance Bill 2026-27 contains a series of sales tax relief measures covering the refinery, electric vehicle, aviation, shipping, publishing and healthcare sectors.
The Finance Bill proposes exemption from sales tax on magazines and abolition of sales tax on tampons.
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The Finance Bill has also extended till June 30, 2027 the exemption available on import of Completely Knocked Down (CKD) kits for electric vehicles. The sunset clause applicable to electric vehicles has also been extended up to June 30, 2027.
The Finance Bill further enhances the scope of sales tax exemption on aircraft parts imported or leased by Pakistan International Airlines Corporation Limited (PIACL).
The government has also granted exemption of sales tax to promote strategic investment in the shipping sector and provides exemptions on specified imports required for the Shanghai Cooperation Organisation (SCO) Summit and ongoing counter-terrorism operations.
The Finance Bill, however, proposes withdrawal of the existing sales tax exemption on family planning devices.
On the revenue side, the Finance Bill proposes expansion of the Third Schedule of the Sales Tax Act to ensure payment of sales tax at consumer prices by manufacturers at the manufacturing stage.
The Finance Bill also introduced withholding of sales tax by toll manufacturers from unregistered buyers and expands the scope of withholding sales tax by Associations of Persons (AOPs) and individuals on purchases from unregistered persons.
The Finance Bill further proposed recovery of three percent value-added tax from manufacturers where imported raw material is sold in the same state without being used in manufacturing.
The Finance Bill seeks rationalisation of penalties on certain sales tax offences and proposes inclusion of three additional offences in Section 33 of the Sales Tax Act for imposition of penalties.
The Finance Bill contains a wide range of measures aimed at streamlining sales tax administration through increased digitalisation and automation.
The Finance Bill introduces definitions relating to advance receipt invoice, algorithmic settlement mechanism, electronic invoicing system, national faceless centre and production monitoring system.
The government has also proposed streamlining the definition of Tier-1 retailers by including retailers having annual turnover of Rs200 million or more within the category.
The Finance Bill clarifies the timing of delivery of goods to recipients and authorises the Federal Board of Revenue (FBR) to outsource the valuation of goods.
The Finance Bill further proposes a new mechanism for taxation of the steel sector based on monthly electricity consumption through amendments in Section 6 of the Sales Tax Act.
The Finance Bill empowers the FBR to increase or decrease the limit of input tax adjustment under Section 8B and introduces electronic issuance of debit and credit notes for adjustment purposes. The government has also introduced a new Section 11H relating to faceless audit and assessment, while new provisions relating to faceless jurisdiction, faceless appeals and establishment of a National Faceless Centre have also been proposed.
The Finance Bill also seeks to discourage fake and flying invoices through amendments in Section 21 and makes issuance of invoices mandatory for exempt supplies through changes in Section 23.
Copyright Business Recorder, 2026