New tax plan post G-B court ruling

FBR to collect taxes on Chinese imports after entry into mainland Pakistan

ISLAMABAD:

The federal government has decided to honour a judgment from the Gilgit-Baltistan (G-B) court, which barred the collection of federal taxes within its territory, and will now collect taxes on imports from China once these goods enter mainland Pakistan.

The tax authorities, On Monday, briefed Finance Minister Muhammad Aurangzeb about the new arrangement during his visit to the Federal Board of Revenue (FBR) Headquarters. The meeting, chaired by the finance minister, was attended by Minister of State for Finance Ali Pervez Malik and newly appointed FBR Chairman Rashid Mahmood Langrial.

The federal government has made the decision to comply with the interim judgment of the chief court of G-B—a special territory—by refraining from collecting taxes at the Sost Border post, according to the brief given to the finance minister. This decision was taken after the federal government was unable to secure legal relief from the courts. The Attorney General for Pakistan's office also advised honouring the special area's court ruling, according to government officials. Pakistani income tax and sales tax laws are not applicable to the G-B region, yet taxes were previously collected on all imports from China, including those consumed within the G-B territory.

Under the new arrangement, tax authorities will obtain post-dated cheques from importers while the court's interim decision remains in effect. In case the final judgment comes against the government, these cheques will be returned. The tax exemptions apply solely to the G-B area, and once these imports from China enter Pakistan through Thakot, the federal government will collect all due taxes, according to the arrangement.

Last month, the Gilgit-Baltistan chief bourt declared that the income tax, sales tax, and additional sales tax collected by revenue authorities on goods imported from China through the Khunjerab Pass were illegal and stopped the FBR and Customs from collecting these taxes. The order was issued in response to a petition filed by the G-B Importers and Exporters Association.

"We cannot collect sales tax and income tax within G-B as per the court's interim orders, so we are going to comply," said FBR officials. They added that since these orders apply only within G-B territory, the tax authorities have established checkpoints at those crossover points where, if these goods enter the tariff area, they will collect the recoverable taxes.

The FBR also briefed the finance minister about a Rs135 billion scam. The finance minister was informed that the matter is now pending before a fact-finding committee and any decision will be taken once the committee gives its report.

According to a report published in The Express Tribune on Sunday, the government uncovered a Rs135 billion scam involving the import of a highly inflammable and dangerous petrol adulterant, marketed as high-quality petrol. This solvent, mixed with petrol, has caused significant damage to car engines and resulted in financial losses for both consumers and the national treasury, according to Customs Intelligence.

This seven-member fact-finding committee was constituted following intervention from the prime minister's office. The committee is currently investigating the illegal import, clearance, and sale of Light Aliphatic Hydrocarbon Solvent, a hazardous petroleum product, allegedly in violation of the Petroleum Act of 1969 and the Petroleum Rules of 1937, according to a notification issued by the Petroleum Division.

The committee has been tasked with uncovering the facts of the scam, providing recommendations, and determining responsibility within seven days, according to the notification. The committee has already held a couple of meetings.

However, the Quetta Chamber of Commerce and Industry claims that there was no loss of revenue and that the substance in question is not used as an adulterant. Over 807 tankers have been stuck at the border post, and the FBR has linked their release to the import license to be issued by the Oil and Gas Regulatory Authority.

According to an FBR press statement, the finance minister acknowledged the services and contributions of former chairman FBR Malik Amjed Zubair Tiwana, especially his role in the budgeting process and International Monetary Fund negotiations. The meeting also deliberated upon strategies to achieve the current financial year's revenue collection targets. The federal minister appreciated the FBR team's persistent efforts in maximising revenue and broadening the tax base for sustained economic development, the statement added.