Abuse of tax incentives in tribal areas is causing an uproar

Islamabad:

Representatives from various sectors have raised concerns over the misuse of the tax incentive package for the former Federal Tribal Areas (FATA), claiming that the concessions announced in 2019 are hurting the ghee, edible oil and steel industries across the country. At a press conference in Islamabad on Monday, key players in these sectors demanded that the government scrap the exemptions granted to the industry in the erstwhile FATA and the Provincially Administered Tribal Areas (PATA) for five years. Sheikh Abdul Razzak, President of Pakistan Vanaspati Manufacturers Association (PVMA), highlighted that the concessions granted to FATA included full exemptions from income tax, sales tax (both at local and import stage), customs duties (at import stage importation of plant and machinery ), turnover tax exemption from annual tax returns and income tax withholding exemption for local supplies. “As a result, there is a difference of about 27% between the units of the former FATA and the rest of the country,” Razzak added.

He informed that with a total population of around 6.25 million, the requirement of ghee and edible oil in the former FATA and PATA should be around 52,000 tonnes during January-May 2024 based on per capita consumption of 20 kg per annum. “But the ghee units in these exempted areas have already imported 180,000 tonnes of edible oil including palm oil in five months,” he said, adding, “This clearly shows that the oil mills and mills of the exempted areas were selling their products to the mainland. Pakistan even as far as Punjab and parts of Sindh in the last five years.”

Similar issues were raised by the steel sector, with tax exemptions amounting to around Rs 50,000 per tonne on steel products. Khurram Mughal, Managing Director of Mughal Steels and Khawar Suddiquie of Aisha Steels said that most of the steel units working in Hattar Industrial Area, Gadoon Industrial Area and Hayatabad Industrial Area have been closed, with 16 steel units closed in Hattar District, Khyber. -Pakhtunkhwa, and eight in Islamabad. Mughal said that steel plants related to the China-Pakistan Economic Corridor (CPEC), which Chinese investors had planned to set up in the Rashakai Economic Zone, have now been abandoned and rejected due to FATA/PATA tax issues.

Meanwhile, in a statement, the Fruit Juice Council has asked the government to remove the 20% federal excise duty plus 18% GST on packaged fruit juices in the upcoming Federal Budget 2024-25 as it directly affects the rural economy of fruit farmers . in Pakistan, especially Punjab. FJC spokesperson Aatekah Mir Khan said, “The sudden imposition of 20% FED on juices on top of 18% GST in Budget 2023-24 has led to a 41% drop in industry volume.

FJC includes CitroPak, Haleeb, Nestlé, PepsiCo, Popular, Shezan and TetraPak, with an annual turnover of around Rs 60 billion in 2022, employing more than 10,000 employees.