The Economic Survey (2008-09) disclosed that the sales tax exemption was Rs 17.5 billion in 2008-09 against Rs 17.60 billion during 2007-08 (-0.57 percent decease); income tax, Rs 40.864 billion against Rs 27.66 billion (47.74 percent increase) and cost of custom duty exemption was Rs 61.282 billion in 2008-09 against Rs 41.397 billion (48.03 percent increase) during the corresponding period of last fiscal.
The Economic Survey has not specified any revenue loss to the exemptions within the federal excise regime, reflecting no loss occurred on this account. The government has suffered a major loss of Rs 18.760 billion due to the exemption of capital gains during current fiscal against Rs 18.48 billion in the same period of 2007-08. If capital gain exemption is excluded from the total revenue loss, the cost of exemptions would reduce from Rs 119.646 billion to Rs 100.866 billion during 2008-09.
Major sales tax exemptions are on pharmaceutical products, tractors and other agricultural machinery. The revenue loss on account of exemption to pharmaceutical products is Rs 3.1 billion in 2008-09 against Rs 2.30 billion in the same period last fiscal. Exemptions to tractors and other agricultural machinery caused a loss of Rs 5.7 billion against Rs 5.60 billion; fertilisers, Rs 8.20 billion against Rs 9.20 billion and exemptions to others inputs including agri seeds and cattle feed caused a loss of Rs 0.50 billion in 2007-08 against the same in last fiscal.
The total number of income tax exemptions is 100, whereas cost of these exemptions is Rs 40.86 billion during the period under review. Major income tax exemptions included exemptions related to pensions, provident funds and superannuation fund; interest on borrowing from external sources; non-profit charitable, religious and welfare activities; non-profit educational institutions; electric power generation and exemptions on un-explained period to tax holidays for industrial undertaking.
The government has also suffered a loss Rs 0.772 billion in 2008-09 due to income tax exemption available to Independent Power Producers (IPPs) against Rs 4.70 billion during 2007-08.
The income tax exemption to pensioners cost Rs 0.054 billion in 2008-09; allowances Rs 0.359 billion; income from funds (eg NIT Units) Rs 0.828 billion; donations and contributions to charitable organisations Rs 0.517 billion; income from certain trusts, welfare and charitable institutions and non-profit organisations Rs 1.050 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 0.025 billion; export of Information Technology Rs 0.602 billion and other sector and enterprise specific exemption caused a loss of Rs 17.897 billion against Rs 0.97 billion in the corresponding period last fiscal.
Seven customs notifications caused an accumulative loss of Rs 61.282 million in 2008-09 against Rs 41.397 million in 2007-08. 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.
The temporary importation scheme (SRO.410) has caused a huge loss of Rs 2.335 million during this period against Rs 1.83 million in the same period last fiscal. The conditional exemption of customs duty on import of raw materials and components etc for manufacture of certain goods (survey based) resulted in revenue loss of Rs 2.83 million during the period under review against Rs 2.94 million.
The general and conditional exemption of customs duty under SRO.567(I)/2005 (non-survey based) cost revenue loss of Rs 18.121 million in 2008-09 against Rs 5.869 million in the same period previous fiscal.
Similarly, the concession of customs duty and sales tax on the import of machinery by Exploration and Production (E&P) companies (SRO.678(I)/2004) caused a loss of Rs 4.401 million against Rs 2.23 million. The concession of customs duty on goods imported from Sri Lanka under SRO.570(I)/2005 caused a loss of Rs 0.036 million against Rs 0.022 million.
The concession of customs duty on the import of specific machinery, equipment and apparatus resulted in revenue loss of Rs 11.189 million during 2008-2009 against Rs 9.139 million in the same period last fiscal. The government has suffered loss of Rs 22.361 million due to other concessionary SROs during 2008-2009 against Rs 19.341 million.