ISLAMABAD: The Federal Board of Revenue’s tax collection of over Rs 3 billion per annum from imports from China is at stake as Chief Court Gilgit Baltistan has stopped FBR from collecting sales tax/income tax from Sost Border.

The Collectorate of Customs (Gilgit Baltistan) has written a letter to the FBR on restraining order on collection of sales tax and income tax on import stage by Chief Court – Gilgit Baltistan.

According to the communication of the Collector of Customs to the FBR, Chief Court – Gilgit Baltistan on July 20, 2024, in writ petition number 201 of 2024, has passed an ex-parte restraining order at admission stage without issuing notices to the FBR and other respondents: “to not collect sales tax, income tax and additional sales tax from importers and exporters at Sost Dry Port, declaring that Gilgit Baltistan is exempt from these taxes.

Data revealed that the sales tax and income tax at the import stage at Sost Dry Port were collected last year equal to Rs 2.798 billion and Rs 0.979 billion respectively, according to the Collector of Customs.

The Sales Tax Act 1990 and Income Tax Ordinance 2001 have not been extended to Gilgit Baltistan as per Gilgit-Baltistan Constitution Order 2018 and its predecessor constitutional orders. However, under Constitution Order 2018, the Prime Minister is empowered to do so.

The issue has long historic background since 1981, in fact Income Tax Ordinance 2001 was extended to Gilgit Baltistan in 2012 and later withdrawn as a result of discussions and decisions in FBR and Prime Minister office.

The matter involves important constitutional issues, if the Board reaches to conclusion that the subject restraining order needs to be contested in the court then it is proposed that the Board may hire a constitutional lawyer from Islamabad, as no suitable lawyer is available here. In such a situation, the office of Attorney General of Pakistan may also be engaged if deemed necessary, Collector of Customs added.

The order of the Chief Court Gilgit Baltistan revealed that admittedly, the territory of Gilgit Baltistan is exempted from imposition of all kinds of taxes, which has already been decided in a plethora of judgements. The points raised by the petitioners (importers and exporters associations) need further consideration. Hence petition is admitted for regular hearing.

In the meantime, the FBR is restrained from collection/deduction of income tax, sales tax and additional sales tax from the importers and exporters of Gilgit Baltistan on import stage at Sost Station, order of the Chief Court Gilgit Baltistan added.

Copyright Business Recorder, 2024