A major tax distortion has been pointed out by the local engineering sector following issuance of notification on the sales tax exemption on the import of plant and machinery, as locally assembled manufactured plant/ machinery would remain subject to sales tax, creating tax discrimination between the imported and local machinery.
Tax experts told Business Recorder here on Thursday that the exemption of sales tax on the import of machinery and equipment has created distortion for the local engineering sector, which has to pay sales tax on the locally manufactured machinery and equipment.
Sources said that the Pakistan Business Forum has raised serious concern on overlooking local engineering sector by the FBR. Recently, the FBR has issued notification 727(I)/2011 and extended exemption on imported plants and machinery subject to its use by industrial sector. The spokesman of the Pakistan Business Form said that we are not against the exemption on plant and machinery, however discriminatory treatment with local assemblers is not fair at all.
He informed at present though local engineering sector is not as flourished as other industries, there is significant potential of development which can't be turndown. Engineering sector is the backbone of the economy in all the developed countries, if government/policy maker continues to ignore this important sector, the country would never be able to compete internationally.
Local engineering sector has urged Chairman FBR Salman Siddiq to revisit the notification and extend scope of exemption/zero-rating on locally assembled plant, machinery and industrial purpose generators to keep intact interest of the local industry and to provide them level playing field. The irony of the fact is that after August 1, 2011, imported plant and machinery would enjoy sales tax exemption, whereas locally assembled plants would remain taxable, experts added.