According to the observations of the customs officials, attention is invited towards applicability of sales tax and income tax in view of the amendments brought in Section 3 of the Sales Tax Act, 1990 and Federal Excise Act, 2005 through Finance Act, 2017, whereby new clause has been inserted which read as "(b) Goods imported into Pakistan, (irrespective of their final destination in territories of Pakistan)." Plain reading of these amendments suggests that any goods destined for FATA/PATA shall attract sales tax at the statutory rates. However, Article 247(3) provides that no parliamentary act would extend to FATA/PATA unless the president (or governor in case of PATA) so directs.
In view of the foregoing provisions, Peshawar High Court has given legal protection of sales tax and income tax to the importing units located in FATA/PATA through various judgments in writ petition No. 264/2004, 1825/2004, 916-P/2013 & 4144 P/2016. However, Supreme Court has allowed departmental appeal against some of these impugned judgments, except those units in respect of which the august Supreme Court of Pakistan has suspended application of the impugned judgments vide order dated 18.02.2016 and dated 29.04.2016. Therefore, the MCC Collectorate Peshawar at present is allowing clearances to the importing units of FATA/PATA in accordance with the judgments of the superior courts.
As a confusion regarding applicability of recent amendments brought about in the Sales Tax Act, 1990 has arisen further compounded by the fact that no such corresponding changes seem to have occurred in section 148 of the Income Tax Ordinance, 2001 and that the matter is still sub judice before the apex court, clarification from the Board is solicited regarding application of the sales tax and income tax on the goods destined for FATA/PATA, the customs officials added.
It is worth mentioning that the FBR high ups had informed Senate Standing Committee on Finance that Finance Act, 2017 has imposed sales tax on import of raw materials and inputs to be consumed in factories/industrial units located in Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA) from 2017-18. The FBR wanted to provide a level playing field to all manufacturers operating in tariff areas as well as non-tariff areas of Pakistan. A number of factories have been set up within the territorial jurisdiction of FATA/PATA and taxpayers in tariff areas of Pakistan feel threatened due to exemptions available to the FATA/PATA.
In order to provide level plying field, sales tax would be collected on imports of inputs meant for FATA/PATA irrespective of the final destination. As per amendment in the Sales Tax Act through Finance Bill 2017, in section 3, (i) in sub-section (1), in clause (b), after the word "Pakistan", a comma shall be inserted and thereafter the words "irrespective of their final destination in territories of Pakistan as specified in clause (2) of Article 1 of the Constitution of Islamic Republic of Pakistan" shall be Inserted, Finance Act amendment added.
Copyright Business Recorder, 2017