Senate panel for exempting AWT from tax

Army Welfare Trust runs businesses for welfare of retired army personnel

Shahbaz Rana June 23, 2021


A Senate panel on Tuesday recommended exempting income of the Army Welfare Trust (AWT) from tax, which runs businesses for welfare of retired army personnel, and also rejected an increase in sales tax rate on import of machinery.

The Senate Standing Committee on Finance recommended exempting the income of the AWT on a proposal moved by PTI’s Senator Faisal Saleem. The trust will also not be required to file an annual income tax return. JUI-F Senator Talha Mehmood heads the meeting.

PPP’s Senator Saleem Mandviwalla also backed the proposal to exempt the trust’s income. PTI’s Senator Mohsin Aziz said the Federal Board of Revenue (FBR) should publicize the criteria for exempting charitable and non-profit organizations from levy of the income tax.

The AWT owns public listed companies like Askari General Insurance and Askari Life Assurance. Its non-listed public companies are MAL Pakistan and AWT investments.

Among the private limited companies are Askari Aviation Services, Askari Guards, Askari Enterprises Fauji Security Services and Askari Development and Holding.

The part one of the second schedule exempts incomes of entities and individuals from tax and the committee has recommended including the trust in part one of the second schedule, which has taken it out from the purview of the income tax law.

The government had proposed in the budget to exempt 15 entities from the purview of the income tax law. These include all registered political parties, Islamic Naya Pakistan Certificate Company, Abdul Sattar Edhi Foundation, Indus Hospitals, Privatization Commission of Pakistan, Fauji Foundation, The Securities and Exchange Commission of Pakistan, Sundas Foundation, Ali Zaib Foundation, Audit Oversight Board, Make a Wish Foundation and the Citizens Foundation.

Mandviwalla said the powers to exempt nonprofit organizations from the purview of the income tax should be given to the FBR chairman instead of doing this through amendment in the income tax law.

The standing committee also rejected the budget proposal to increase the sales tax rate on the import of plant and machinery from 10% to 17%. FBR Chairman Asim Ahmed hinted at accepting the committee’s recommendation.

“It is a hardship case and the committee can give recommendations to maintain the sales tax rate at current 10%,” said Ahmed.

Industrialists are in process of importing $2.5 billion worth of plant and machinery for expansion and yet the government proposed in the budget to increase the tax rate, said value-added textile forum chairman Zubair Motiwala.

The standing committee also recommended reducing the withholding tax rate for exporters from 1% to 0.5%. The chairman FBR agreed to the proposal.
The committee proposed to freeze the 0.25% levy being charged from the exporters for three years due to Covid-19 and also called for giving the control of the Export Development Fund to the Ministry of Commerce instead of the Ministry of Finance.

About Rs58 billion are collected in the fund by charging 0.25% levy and yet the Ministry of Finance gives only Rs600 million per annum for the promotion and marketing of the export related activities, said additional secretary commerce.

The standing committee also recommended maintaining the sales tax rate at 10% for the ginned cotton but the FBR chairman opposed the proposal. The committee was divided over the proposal of reducing the zero-rating facility for the exporters.

The chairman of the committee, Senator Talha Mehmood, directed the FBR to submit a report on its raid at a cold storage factory, owned by PTI senator Mohsin Aziz. “About a year ago, 100 gunmen raided a small factory unit, Aziz Ice and Cold Storage, and manhandled the staff,” said Senator Mohsin.
He said after the incident, he was declared a “smuggler” and his name still appeared as a smuggler on the FBR’s website. Senator Mohsin said he earlier did not bring the issue to the committee forum due to conflict of interest.

“Such highhandedness stops the legislators from giving more powers to the FBR.” Mandviwalla said.