Rs20bn per annum revenue loss likely
RECORDER REPORT
ISLAMABAD: The tax incentives package for erstwhile Federally Administered Tribal Areas (Fata) and Provincially Administered Tribal Areas (PATA) notified by the Federal Board of Revenue (FBR) Monday revealed sales tax exemption for retailers and industrial units located in Fata/Pata, exemption from sales tax and 'extra sales tax' on the supply of electricity to domestic, commercial and industrial consumers including retailers and exemption from income tax on profits and gains of individuals, Association of Persons (AoPs) and companies located in erstwhile Fata/Pata.
In this regard, the FBR has issued SRO 890(1)/2018, SRO 889(1)/2018, SRO 888(1)/2018, SRO 887(1)/2018, here on Monday to notify the package.
Sources said that the exemptions/concessions will result in revenue loss of around Rs 20 billion per annum.
Under the tax incentive package for erstwhile FATA/PATA, exemption from withholding tax has been provided on payment of salaries. The exemption from withholding taxes has also been granted, if the payer and the recipient are residents of the territories constituting the erstwhile FATA/PATA. However, no SRO has been issued to deal with the non-customs paid vehicles in FATA/PATA. Under the package, non customs paid vehicles may be allowed to be used in erstwhile FATA/PATA for a period of five years ending on June 30, 2023. However these vehicles may be seized if they cross over to other areas of Pakistan. On expiry of five years, the vehicles may be surrendered and an option may be given to residents of the newly merged areas wherein the vehicles may be regularized on payment of leviable duty, taxes along with surcharge provided that the local administration of pre merger tribal areas has verified/authenticated the number of such vehicles along with the details of make, model chassis number and to the custom authorities by the September 30, 2018, sources said.
Under SRO 890(1)/2018 issued by the FBR, the federal government has exempted whole of sales tax on goods produced and supplied by industrial units located in districts of Chitral, Dir and Swat (which includes Kalam), the Tribal Area in Kohistan district, Malakand Protected Area, the Tribal Area adjoining Mansehra district, the former State of Amb, Zhob district, Loralai district (excluding Duki Tehsil), Dalbandin Tehsil of Chagai District and Marri and Bugti tribal territories of Sibi district, Tribal areas adjoining the districts of Peshawar, Kohat, Bannu, Lakki Marwat, Dera Ismail Khan, Tank as well as Bajaur Agency, Orakzai Agency, Mohmand Agency, Khyber Agency, Kurram Agency North Waziristan Agency and South Waziristan Agency:
Provided that exemption under this notification shall be available only to those industrial units which have been set up on or before May 31, 2018 and industrial production and supplies have been commenced on or before the said date. Provided further that no refund and adjustment of sales tax shall be admissible in respect of sales tax charged on supplies.
The SRO 890(1)/2018 shall take effect from the date of assent given by the President to the Constitution (Twenty-fifth Amendment) Act, 2018.
As per SRO 889(I)/2018, the FBR has exempted whole of sales tax chargeable under sub-section (l) of section 3 read with sub-section (9) of section 3 of the Sales Tax Act, 1990 on supply of goods by retailers and sales tax payable under sub-section (9A) of section 3 of the Sales Tax Act, 1990 by retailers located in districts of Chitral, Dir and Swat (which includes Kalam), the Tribal Area in Kohistan district, Malakand Protected Area, the
Tribal Area adjoining Mansehra district, the former State of Amb, Zhob district, Loralai district (excluding Duki Tehsil), Dalbandin Tehsil of Chagai District and Marri and Bugti tribal territories of Sibi district, Tribal areas adjoining the districts of Peshawar, Kohat, Bannu, Lakki Marwat, Dera Ismail Khan, Tank as well as Bajaur Agency, Orakzai Agency, Mohmand Agency, Khyber Agency, Kurrum Agency North Waziristan Agency and South Waziristan Agency. Provided that no refund and adjustment of sales tax charged on supply of electricity from the date of assent given by the President to the Constitution (Twenty fifth Amendment) Act, 2018shall be admissible in respect of sales tax charged under sub-section (9) of section 3 of the Sales Tax Act, 1990 to retailers exempted under this notification.
Under SRO 888(I)/2018, the FBR exempted, from whole of sales tax including extra tax chargeable under Chapter IVA of Sales Tax Special Procedure Rules, 2007, on supply of electricity to domestic, commercial and industrial consumers including retailers of districts of Chitral, Dir and Swat (which includes Kalam), the Tribal Area in Kohistan district, Malakand Protected Area, the Tribal Area adjoining Mansehra district, the former State of Amb, Zhob district, Loralai district (excluding Duki Tehsil), Dalbandin Tehsil of Chagai District and Marri and Bugti tribal territories of Sibi district, Tribal areas adjoining the districts of Peshawar, Kohat, Bannu, Lakki Marwat, Dera Ismail Khan, Tank as well as Bajaur Agency, Orakzai Agency, Mohmand Agency, Khyber Agency, Kurrum Agency North Waziristan Agency and South Waziristan Agency. Provided that exemption from sales tax including extra tax chargeable under Chapter IVA of Sales Tax Special Procedure Rules, 2007 on supply of electricity shall be available to those industrial consumers who have set up of industries prior to 31st May, 2018 and industrial production has been started on or before the said date:
Provided further that no refund and adjustment of sales tax charged on supply of electricity from the date of assent given by the President to the Constitution (Twenty-fifth Amendment) Act, 2018 shall be admissible to consumers exempted under this notification. Under SRO 887(1)/2018, the federal government has exempted income tax on profits and gains derived by individuals from any source in the districts of Chitral, Dir and Swat (which includes Kalam), the former Tribal Area in Kohistan district, Malakand former Protected Areas the former Tribal Area adjoining Mansehra district, the former State of Amb, Zhob district, Loralai district (excluding Duki Tehsil), Dalbandin Tehsil of Chagai district and Marri and former Bugti Tribal territories of Sibi district, former Tribal Areas adjoining the districts of Peshawar, Kohat, Bannu, Lakki Marwat, Dera Ismail Khan, Tank as well as former Tribal Areas i.e. Bajaur Agency, Orakzai Agency, Mohmand Agency, Khyber Agency, Kurram Agency, North Waziristan Agency and South Waziristan Agency, provided that existing business set ups register themselves with field offices of FBR by 30th September, 2018.
The income tax has been exempted on profits and gains of existing businesses conducted by association of persons and companies from any source in the districts of Chitral, Dir and Swat (which includes Kalam), the former Tribal Area in Kohistan district, Malakand former Protected Areas the former Tribal Area adjoining Mansehra district, the former State of Amb, Zhob district, Loralai district (excluding Duki Tehsil), Dalbandin Tehsil of Chagai district and Marri and former Bugti Tribal territories of Sibi district, former Tribal Areas adjoining the districts of Peshawar, Kohat, Bannu, Lakki Marwat, Dera Ismail Khan, Tank as well as former Tribal Areas i.e. Bajaur Agency, Orakzai Agency, Mohmand Agency, Khyber Agency, Kurram Agency, North Waziristan Agency and South Waziristan Agency, provided that existing business set ups register themselves with field offices of FBR by September 30, 2018.
Provided further that the exemption under this clause shall be restricted to the association of persons and companies whose registered offices are in the aforesaid Areas.
The provisions of sections in Division III of Part V of Chapter X and Chapter XII of the Income Tax Ordinance for deduction or collection of tax shall not apply in the districts of Chitral, Dir and Swat (which includes Kalam), the former Tribal Area in Kohistan district, Malakand former Protected Areas the former Tribal Area adjoining Mansehra district, the former State of Amb, Zhob district, Loralai district (excluding Duki Tehsil), Dalbandin Tehsil of Chagai district and Marri and former Bugti Tribal territories of Sibi district, former Tribal Areas adjoining the districts of Peshawar, Kohat, Bannu, Lakki Marwat, Dera Ismail Khan, Tank as well as former Tribal Areas i.e. Bajaur Agency, Orakzai Agency, Mohmand Agency, Khyber Agency, Kurram Agency, North Waziristan Agency and South Waziristan Agency, if the payer and the recipient are residents of the aforesaid areas.
Provided the provision of section 149 shall not apply in respect of persons working in the aforesaid areas even if the payer resides outside the aforesaid areas, the FBR's notification added.
