Prime Minister Fiscal Relief Package for Khyber Pakhtunkhwa, Fata: two-year extension may cost FBR Rs 20 billion

The FBR will suffer a revenue loss of Rs 20 billion in case the Prime Minister Minister's fiscal relief package for the businessmen of the Khyber Pakhtunkhawa and tribal areas has been further extended for two years. Sources told Business Recorder here on Tuesday that one year revenue loss due to expected continuation of the fiscal relief package would cause revenue loss of Rs 10 billion in 2012-2013.
If the package has been extended for a period of two years, the FBR will suffer revenue loss to the tune of Rs 20 billion. Senate has approved a recommendation of the Standing Committee on Finance to allow two years extension in the Prime Minister's fiscal relief package announced for the manufacturers, traders and other categories of businessmen operating in the war-affected areas of KP. The PM package would be expired on June 30, 2012.
This package was intended to be available for three years, however, the sales tax and the federal excise duty (FED) portion of the PM's fiscal relief package do not have an expiry date. At the same time, this scheme has created distortions in the tax regime. The FBR had notified the fiscal concessions through SROs 160 to 165(I)/2010.
Under these notifications, the sales tax exemption was announced on supply of electric power to manufacturers; 50% reduction in the rate of sales tax on domestic supplies of goods ; exemption of excise duty on goods manufactured in Fata/Pata and selected 13 districts of KP. Therefore, the FBR had proposed in budget (2012-13) that the distortion may be removed by withdrawing all notifications pertaining to the sales tax and the FED.