Temporary imports: IPPs allowed to re-export machinery, equipment

Govt reverses earlier decision; says re-export can take place after 3 years

ISLAMABAD: The PML-N government has decided against its earlier decision of banning re-export of machinery and plants for short-term independent power producers (IPP), now allowing the sector to re-export the equipment after three years have been completed.

During Musharraf’s regime, the government allowed rental power plants (RPP) to import equipment on the condition that it would be re-exported after a period of three years – allowing it to enjoy tax exemption. Water and Power Minister Khawaja Asif had challenged the decision in the Supreme Court at the time.

After taking charge, Asif also had the name of RPPs changed and introduced a policy on short-term IPPs in January 2015 – approved by the Economic Coordination Committee (ECC) – that disallowed the re-export of machinery and plants, effectively killing the tax exemption status.

However, in its meeting on April 23, the ECC lifted the ban on re-export of plants and machinery.

The meeting was informed that there was a tax-exemption status on the temporary import of power generation equipment granted through the policy on May 5, 2006. It was subject to the condition that machinery and equipment would be re-exported after a period of 36 months and should not be used for the purpose other than it was imported. The specific SRO, however, was rescinded in budget 2014-15.

The meeting was further informed that the Ministry of Water and Power had moved a summary for the ECC seeking approval of the policy framework for short-term IPPs. It implied that the total exemption of customs duty on temporary import of power generation machinery and equipment would be applicable for a further three-year period subject to the condition that it would be re-exported and should not be used for the purpose other than it was imported as earlier envisaged in the decision taken in 2006.

The ECC of the cabinet approved this policy. The Federal Board of Revenue (FBR) said that the ECC’s decision was in contradiction with the provisions of the policy framework and was also not in consonance with the scheme of duty-free temporary imports. Exemption of the custom duty on temporary import of power generation machinery and equipment should, therefore, remain intact.

Published in The Express Tribune, May 15^th, 2015.

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