The partial withdrawal of the Prime Minister's fiscal relief package for Khyber-Pakhtunkhwa and Federally Administered Tribal Areas (Fata) and Provincially Administered Tribal Areas (Pata) has created confusion among investors/traders, as notifications granting exemptions of sales tax and federal excise duty (FED) have still not been rescinded.
Sources told Business Recorder on Saturday income tax exemptions granted to the business community of the said areas were taken away from 2012-13. On the other hand, SROs 160 to 165(I)/2010, dealing with the sales tax and the FED exemption to the Khyber-Pakhtunkhwa and adjacent tribal areas, had not been rescinded. This showed that direct taxes exemptions for Khyber-Pakhtunkhwa and tribal areas have been withdraw under Clause 126(F) of the Second Schedule of the Income Tax Ordinance 2001.
Contrary to this, all sales tax and federal excise duty notifications part of the fiscal relief package were still in force despite withdrawal of income tax concessions.
Sources explained that SROs 160 to 165(I)/2010 were not time bound exemptions, whereas concessions under Clause 126(F) of the Second Schedule of the Income Tax Ordinance 2001 remained operative June 30 this year. Thus, this exemption had expired and not been extended. However, SROs 160 to 165(I)/2010 should be rescinded if the government desires to do so. So far, the Federal Board of Revenue (FBR) had not received any directions from the Ministry of Finance for rescinding the notifications.
Under these notifications, a 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 Khyber-Pakhtunkhwa. Therefore, distortions should be removed by withdrawing all notifications pertaining to sales tax and FED.