The sales tax exemption was Rs 24.300 billion in 2011-12 against Rs 33.762 billion in 2010-11; income tax, Rs 69.608 billion against Rs 46.508 billion and cost of custom duty exemption was Rs 91.588 billion in 2011-12 against Rs 94.941 billion during the corresponding period of last fiscal year.
The Economic Survey has not specified any revenue loss to the exemptions within the federal excise regime, reflecting no loss occurred on this account. However, importers, investors and local manufactures have availed concessions and exemption of Rs 91.588 billion under different notifications of customs duty and free trade agreements during 2011-12 against Rs 94.941 billion in 2010-11.
On the direct taxes side, the revenue loss on account of capital gains has been drastically reduced from Rs 21.840 billion in 2010-11 to Rs 2.108 billion during 2011-12, reflecting a major decrease of Rs 19.732 billion. During one year period, the revenue loss due to capital gains stood at Rs 2.108 billion in 2011-12 against Rs 21.840 billion during 2010-11.
Previously, sales tax exemptions were on tractors, fertilisers and pesticides etc. However, the Federal Government rationalised the extent of exemptions and from March 15, 2011 onwards, tractors, pesticides and fertilisers were chargeable to sales tax. The cost of sales tax exemptions has accordingly been worked out and is estimated to be Rs 24.300 billion for the fiscal year 2011-12. Followings are the main exemptions in sales tax and their cost of exemptions during 2011-12 and 2010-11: The revenue loss on account of exemption to pharmaceutical products is Rs 5.800 billion in 2011-12 against Rs 5.505 billion in the same period last fiscal. Exemptions to tractors caused a loss of Rs 4.280 billion against Rs 6.489 billion; fertilisers, zero rupees against Rs 9.138 billion and exemptions to items falling within the category of ''''others'''' caused a loss of Rs 14.220 billion during 2011-12 against Rs 12.630 billion in 2010-11.
The cost of income tax exemptions is Rs 69.608 billion in 2011-12 against Rs 46.508 billion in 2010-11. Major income tax exemptions included exemptions related to pensions/gratuity; income from funds, board of education, universities and computer training institutions; donations and contributions to charitable organisations; Independent Power Producers; income from certain trust, welfare and charitable institutions non-profit organisations; profits on debt/interest from government securities and certain foreign currency accounts/books profit on debt earned by certain non-resident individuals and institutions; export of Information Technology; capital gains and other sector and enterprise specific exemption.
The government has also suffered a loss Rs 46.939 billion in 2011-12 against Rs 0.870 billion in 2010-11 due to income tax exemption available to Independent Power Producers. The data showed that the IPPs have availed income tax exemption to the tune of Rs 46.939 billion during 2011-12 against Rs 0.870 billion in 2010-11, reflecting an extraordinary increase of Rs 46.069 billion.
The income tax exemption to pensioners cost Rs 0.171 billion in 2011-12 against Rs 0.087 billion in 2010-11; income from funds, board of education, universities and computer training institutions Rs 6.077 billion against Rs 0.979 billion; donations and contributions to charitable organisations Rs 0.624 billion against Rs 0.649 billion; income from certain trusts, welfare and charitable institutions and non-profit organisations Rs 0.205 billion against Rs 1.360 billion; profits on debt/interest from government securities and certain foreign currency accounts/books/profits on debt earned by certain non-residents individuals and institutions Rs 1.461 billion against Rs 0.049 billion; export of Information Technology Rs 0.822 billion against Rs 0.724 billion and other sector and enterprise specific exemption caused revenue loss of Rs 11.201 billion in 2011-12 against Rs 19.950 billion in 2010-11.
The customs duty related notifications caused an accumulative loss of Rs 91.588 billion in 2011-12 against Rs 94.941 billion in 2010-11. Customs exemptions are given on raw materials and components; plant, machinery and equipment imported by the high-tech, priority and value added industries; imports for energy sector projects and exemption to exploration and production companies. Some of these exemptions are due to international contractual obligations.
Under the Customs law, exemptions or concessions are granted to goods that are imported into Pakistan through SROs, special classification in Chapter 99 of Pakistan Customs Tariff, and/or through specific rate of tariff. On the basis of these provisions, the tax expenditure in respect of Customs Duty has been estimated at Rs 91.588 billion for 2011-12.
The concession of customs duty on goods imported from Saarc and ECO countries caused revenue loss to the tune of Rs 0.055 billion in 2011-2012 against Rs 0.073 billion in 2010-11. The customs duty exemption on the imports from Sri Lanka resulted in revenue loss of Rs 0.196 billion against Rs 0.148 billion. The customs duty exemption on the imports from China under SRO.1296(I)/2006 of caused revenue loss of Rs 0.0002 billion during 2011-12 against Rs 0.031 billion in 2010-11. The customs duty exemption on the imports from Iran under Pak-Iran PTA caused loss of Rs 0.0009 billion against Rs 0.004 billion. The customs duty exemption on the imports under the Safta agreement caused revenue loss of Rs 0.151 billion during 2011-2012 against Rs 0.116 billion in 2010-2011. The exemption of customs duty on the imports from China under another SRO.659(I)/2007 resulted in revenue loss of Rs 13.762 billion in 2011-12 against Rs 10.867 billion during 2010-11. The customs duty exemption on the imports from Malaysia caused revenue loss to the tune of Rs 2.750 billion during 2011-12 against Rs 2.895 billion in same period previous fiscal year.
The conditional exemption of customs duty on import of raw materials and components etc for manufacture of different sectors resulted in revenue loss of Rs 7.391 billion in 2011-12 against Rs 4.653 billion during the corresponding period last fiscal.
The general and conditional exemption of customs duty under SRO.567(I)/2006 cost revenue loss of Rs 21.830 billion in 2011-12 against Rs 30.277 billion in 2010-11. Similarly, exemption of customs duty and sales tax on the import of machinery, equipment and vehicles by the Exploration and Production (E&P) companies (SRO.678(I)/2004) caused a loss of Rs 2.810 billion against Rs 2.581 billion in the same period last fiscal year.
The concession of customs duty on the import of machinery, equipment and apparatus resulted in revenue loss of Rs 9.833 billion during 2011-12 against Rs 13.712 billion during 2010-11 during same period last fiscal year. The exemption of customs duty for vendors of automotive sector caused revenue loss of Rs 12.851 billion during 2011-12 against Rs 9.315 billion in the corresponding period of last fiscal year.
The exemption of customs duty for OEMs of automotive sector caused revenue loss of Rs 19.196 billion during 2011-12 against Rs 19.073 billion in 2010-11. The exemption of customs duty on the import of machinery and equipment by industrial units registered with the Ministry of Textile Industry caused revenue loss of Rs 0.756 billion against Rs 1.196 billion in 20102-11.