All fruits except fresh apples from Afghanistan exempted from sales tax

ISLAMABAD: The Federal government has exempted all fruits of Afghanistan from sales tax from September 15, 2021 except fresh apples, in addition to allowing extension of six months in APTTA.

Recently, the Revenue Division informed the Federal Cabinet that before issuance of tax laws (3rd amendment) Ordinance 2021, (promulgated on September 15, 2021) SalesTax @ 17 percent was leviable on all imported fruits except those imported from Afghanistan. However, in order to address the issue of Iranian origin apples being imported as “Afghan origin”, which was badly hurting Pakistani domestic apple growers, it was decided that Sales Tax at the standard rate may be levied on apples imported from Afghanistan. While making the change, the words “(except imported from Afghanistan)” were erroneously deleted whereby Sales Tax became leviable on import of all type of fruits from Afghanistan, which was not the intention.

According to Revenue Division, in order to address the issue on emergent basis it was decided: (i) instructions be issued to Customs field formations not to levy Sales Tax on fruits imported from Afghanistan except fresh apples (PCT 0808, 1000); (ii) Sales Tax on fruits (except fresh apples) imported from Afghanistan be exempted from levy of Sales Tax from September 15, 2021; and (iii) a summary be moved to Federal Cabinet to indemnify and give effect to the proposal.

Section 13(2)(a) of the Sales Tax Act, 1990, empowered the Federal Government to exempt the whole or any part of Sales Tax whenever circumstances exist for the purposes of national food security in emergency situations. The exemption of Sales Tax on import of fruits from Afghanistan except apples should be effective from September 15, 2021 (date of promulgation of Tax Laws (Third Amendment) Ordinance, 2021.

Extension in APTTA: Commerce Division informed that the Afghanistan Pakistan Transit Trade Agreement (APTTA 2010) was a 10-year agreement, which was due to expire on February 11, 2021. It was extended initially for three months and subsequently for another six months, by both the governments, with approval of their respective Cabinets by signing additional protocol. It was estimated that 30 percent of ATT passes through Pakistan and remaining 70 percent through Iran, Uzbekistan and Tajikistan. Under the agreement, Pakistan’s exports to Central Asia passed through Afghanistan. The extension expired on November 12, 2020.

According to the Commerce Ministry for revision of APTTA, two meetings had been held, 7th APTTCA meeting in Kabul on 16-17th November 2020 and 8th APTTCA meeting in Islamabad, from 28-30th December 2020. Subsequently, 22 sessions of the technical negotiations had been held from 12 April to 11th August 2021, via video link. In these negotiations, about 95 percent of the text had been agreed. Therefore, Afghan side invited Pakistan side to finalise it, at policy level in 9th APTTCA meeting at Kabul just before change of the Government in Kabul.

The delegation of senior officials from Ministries of Foreign Affairs, Commerce, Interior, Finance, Customs and border agencies visited Kabul on October 21, 2021 and all the issues affecting smooth movement of goods across borders were discussed and it was also decided to engage at working level. Hence, Embassy of Pakistan had extended invitation to Afghan officials to visit Islamabad for this purpose.

In addition to APTTA, Pakistan was bound by international obligations, including United Nations Convention of Land Locked states 1965 and United Nations Convention on Law of sea 1992 for provision of passage of goods to land locked states. Afghanistan, being a land locked country, was also entitled to passage of transit cargo. Besides, this passage through Afghanistan was also meant to facilitate trade and transit to and from the doubly land locked Central Asian States. Historically, Pakistan had always provided access to Afghan Transit Cargo. Before APTTA 2010, access was under ATTA 1965. Moreover, stoppage of transit goods access may result in humanitarian crisis and inflow of refugees.

Commerce Ministry maintained that APTTA 2010 did not cover multimodal bonded, air to land transit as per article 4. However, the Ministry and FBR were of the view that such transit initially from Islamabad Airport would not only ease provision of urgently needed support for Afghanistan but would also generate goodwill for Pakistan in the international community. In this regard, Ministry of Commerce convened an inter-ministerial meeting to discuss the coverage for air to land Multimodal Bonded Movement from Islamabad to Afghanistan on October 15, 2021. All the participants agreed to the proposal.

The Afghanistan Transit Trade Agreement of 1965 allowed Afghan trucks to pass through Border Crossing points (BCPs) on the basis of road permits. This mechanism was replaced with Temporary Admission Document (TAD) in April 2010, but was never implemented. However, Afghanistan and Pakistan allowed passage to each other’s trucks from 2011-2016. The Afghan Government stopped Pakistani trucks carrying export goods for Central Asian Republics at Jalalabad and Spin Boldak, from October 2017 through a Presidential Decree. As a result, Pakistan also stopped Afghan trucks from moving beyond Peshawar and Chaman. Afghan trucks were allowed movement within Pakistan and similar access was given to Pakistan trucks within Afghanistan and to CARs under APTTA 2010. The same arrangement had been agreed by both sides during negotiations to finalize APTTA 2021, with easier modalities and extremely crucial for TIR operations from Pakistan. Multiple times offloading of goods increased the cost and time of transportation and damaged goods, especially perishables.

Ministry of Commerce, in its summary requested the Cabinet to issue directions to Federal Board of Revenue, for unhindered facilitation to Afghan transit goods and trucks, to pass through Pakistan’s designated sea ports and land territory beyond November 11, 2021, for a period of six months and requested reciprocal facilitation from Afghanistan for Pakistan transit goods and trucks, to be implemented simultaneously for passing through Afghan territory for Central Asian Republics and beyond, before signing of APTTA.

Commerce Ministry also sought approval to allow multimodal bonded, air to land transit, for Afghanistan from Islamabad airport through Torkham and Ghulam Khan, on trucks as recommended by the inter-ministerial committee.

The Cabinet approved the proposals of Commerce Ministry including further extension of six months in operation of expired APTTA.

Copyright Business Recorder, 2021