BoI seeks ST zero-rating on CNG buses

The Board of Investment (BOI) has sought approval of the Cabinet Committee on Investment (CCoI) for zero-rating of sales tax on import of CNG/LPG buses in line with SRO 727(1)/2011 under which plant/machinery is exempted to promote environment-friendly transport system in the country.
Sources told Business Recorder here on Saturday that the Board of Investment has submitted a summary to the CCoI for sales tax zero-rating on import of CNG/LPG buses. At present, the CNG buses are subject to 16 percent sales tax under SRO 486(1)/2011.
Details show that the government of Punjab has established the Lahore Transport Company (LTC) as a wholly-owned company under Section 42 of the Companies Ordinance, 1984. The objective of the LTC is to establish a modern, environment-friendly and efficient transport system in Lahore. To achieve this objective, LTC invited proposals in November 2010 for induction of new buses by potential bus operators for plying buses on prescribed routes. In February, 2011, LTC issued Letter of Award (LoA) in favour of Foton Pak Bus Company (Pvt) Ltd as operator of the project.
According to SRO 549(1)/2008 dated June 11, 2008, dedicated CNG buses and all other buses meant for transportation of forty or more passengers whether in CBU or CKD condition (PCT Heading 87.02) were subject to sales tax at zero percent (Annex I) and feasibility of the project was based on this facility. Foton Pak Bus Company (Pvt) Ltd accordingly placed an order for 110 buses at a unit price of $80,794.05/- with total value of $8,968,139.88 to Beiqi Foton Motors Limited, China, sources said.
They said that the issuance of SRO 486(1)/2011 dated June 3, 2011 omitted the above-referred item from the said SRO of June 11, 2008, which implies that CNG buses would now be subject to 16 percent sales tax. The first batch of 56 buses arrived at Port Qasim in October 2011 and FBR released this batch with the undertaking given by the importer that it would deposit sales tax if the said rate would not be reduced to zero percent within 60 days.
The second batch of 54 buses was unloaded on November 6, 2011 at the port and is still awaiting clearance, sources said. It has been recommended that sales tax on import of CNG/LPG buses may revert back to zero percent in line with plant & machinery exempted vide SRO 727(1)/2011 dated August 1, 2011. In this regard, the BoI has sought approval of the Cabinet Committee on Investment.