Erstwhile tribal areas: PALSP urges govt to withdraw ‘unfair’ tax exemption

ISLAMABAD: The Pakistan Association of Large Steel Producers (PALSP) has urged upon the government to withdraw unfair tax exemption enjoyed by units of erstwhile tribal areas, which is massively misused and all products produced in tribal areas are sold in tariff areas of Pakistan.

According to a communication of PALSP to the prime minister, the PALSP appreciates some of the recent initiatives of the government, aimed at revival of the local industry. However, the purpose agenda of the meeting of the Committee on Taxation Regime of NMDs held on 26th Dec 2024 has sent shockwaves to the steel as well as many other industries of the country.

After attending the meeting, we noticed with great concern that the core agenda of the meeting is to perpetuate the killing exemptions unfairly granted to NMDs for the last 6/7 years. These exemptions to NMDs who are now part of Pakistan, give impression of one state and two rules within the same country.

The tax exemption enjoyed by the industrial units in (Fata/Pata) NMDs is massively misused and all products produced in Fata/Pata are being sold to tax areas without any resistance, causing closure of tens of steel units in Hattar estate, Islamabad and Gadoon Industrial Estate. This is most unfair detrimental measure being practiced since last 6/7 years to ruin and destroy the local tax paying industry.

PALSP protests against any measure aimed at perpetuation of these discriminatory exemptions to NMDs.

The association has appealed to the government and to all those who matter to put a stop to these exemptions forthwith.

The steel industry is facing unprecedented crisis and as a result the foreign investors like Century Steel, the first Chinese private sector investment, has already threatened to quit and stop further investments, casting a shadow over the industry’s future.

Apart from steel industry - Long, Flat, Round industry, other important industries including ghee, plastics and tea are suffering due to massive misuse of tax exemptions enjoyed by the NMDs based industrial units. As a result, over 60% of the local steel industry have been wiped out, with more than 50 units closed down in KPK, Islamabad, Lahore, Karachi, and Gujranwala/Daska. The KPK’s largest steel unit, producing 400 tons rebars daily, has been shut down causing loss of billions to the exchequer, the association stated.

The exemptions were extended to FATA/PATA to give relief to people living in the area but the facility/concessions were massively misused and the goods produced in the non-taxed areas are blatantly sold in rest of the country/taxed areas without the levy of Sales Tax. These exemptions pamper a very small fraction of 2% of industry in Fata/Pata at the cost of devastation to 98% industry in rest of the country, the association stated.

In the budget FY 2024-25, the sales tax exemption given to industry of NMDs were extended only for one year with the condition of bank pay order in favor of the FBR at the time of clearance of Raw Materials at import state to safeguard the FBR revenue. However, Fata/Pata industries challenged this budgetary decision in the Peshawar High Court and pleaded to allow post-dated cheques instead of pay-orders for payment of tax/Customs duties. As a result, in the judgement dated

31-10-2024, the PHC ruled in favor of the ex-Fata/Pata mills, setting aside finance bill amendment No. 151 of the fifth schedule of the sales tax Act, 1990, the association maintained.

Those who are pleading for perpetuation of exemptions to NMDs include influentials from political and trade bodies who have stakes in FATA/PATA as they own steel and ghee units in these areas. These are the elements who misguided the govt and working for the perpetuation of these exemptions solely for their personal vested interests; with no relief intended for the common man of NMDs. The government is urged to establish fair and transparent tax system applied uniformly across all regions of the country.

The government must avoid any move aimed at perpetuation of the unfair tax exemptions to NMDs to avoid further damage to the steel, oil, ghee, plastic, tea as well as other industries, it added.

Copyright Business Recorder, 2024