Flying higher: Tax exemptions for airlines, airports

Published: June 6, 2015
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Right now, aviation contributes just 0.01% to GDP, we want to take it to 3% at least," Prime Minister’s Special Assistant on Aviation Shujaat Azeem. PHOTO: EXPRESS

Right now, aviation contributes just 0.01% to GDP, we want to take it to 3% at least," Prime Minister’s Special Assistant on Aviation Shujaat Azeem. PHOTO: EXPRESS

KARACHI: 

The government on Friday announced tax exemptions on import of aircraft, their spare parts, training simulators and equipment used in repair and maintenance of airplanes in a bid to stimulate Pakistan’s flagging aviation sector.

These incentives, which will be made part of the Finance Bill to be debated and approved by the Parliament, were announced by Finance Minister Ishaq Dar while he made his budget speech for fiscal 2015-16.

“The aviation sector’s contribution in Pakistan is a small fraction of 1% of GDP as compared to the share of the sector at 3.4% in the global GDP,” he said, expressing confidence that the package will help spur growth.

It has been proposed that customs duty and sales tax should be exempted on imported or leased aircraft, maintenance kits for trainer aircraft, spare parts and simulators.

This exemption also extends to one-time import of machinery, equipment and tools by recognised engineering companies, said Dar in his speech.

To encourage investment in new airports, especially in cities that see a higher amount of air travellers, the tax exemption has been given on tools, machinery, equipment, furniture and fixtures on a one-time basis.

In another move, air tickets to Gilgit-Baltistan, Makran Coastal belt, Azad Jammu and Kashmir, Chitral and Federally Administered Tribal Areas (FATA) have also been be exempted from payment of Federal Excise Duty and withholding tax.

These tax exemptions were part of the aviation policy unveiled couple of months back. But there were doubts over the extent of relief expected for aviation businesses since revenue officials were against too much relaxation.

“I am glad the incentives have been announced,” said Shujaat Azeem, Prime Minister’s Special Assistant on Aviation. “Right now, aviation contributes just 0.01% to GDP. We want to take it to 3% at least.”

The industry, which right now is dominated by state-owned Pakistan International Airlines, will grow gradually and over a period of time, he said.

“Good news is there is already a lot of interest shown by various local and foreign investors especially in our concept of cargo villages and the MRO (maintenance, repair and overhaul) business.”

The government also stands to gain from rise in passenger traffic, he said. “It collects between Rs2,500 and Rs5,000 in taxes from the sale of a ticket. It’s going to earn much more when more people travel.”

Published in The Express Tribune, June 6th,  2015.

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Reader Comments (2)

  • Jun 6, 2015 - 9:44PM

    “The aviation sector’s contribution in Pakistan is a small fraction of 1% of GDP as compared to the share of the sector at 3.4% in the global GDP,”
    said Shujaat Azeem, Prime Minister’s Special Assistant on Aviation. “Right now, aviation contributes just 0.01% to GDP. We want to take it to 3% at least.”

    Hire someone who can write article / news that commensurate with the facts printed in same article / news. What was that, BTW? 1% or 0.01%? Recommend

  • SMD
    Jun 7, 2015 - 8:51AM

    How much of this tax exempted equipment will be brought in by Advisor’s own company Royal Airport Services RAS? Yes no on knew what’s happening, old habits, in 1st or 2nd round of PML N in 90’s they allowed import of BMWs and than closed it soon everybody wondered why? and then NAB told us it was Saifur Rehman. BTW he is in Qatar these days and all the Govt is planning and doing with LNG is happening in Qatar.
    So coming back to the point if Railways gets improved yes if PIA gets exemption we can believe that general public will also benefit but when it is about jets and handling equipment I am sorry to say its not GDP but the beneficiary are wealthy individuals. You understand?Recommend

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