Sources told Business Recorder that the Ministry of Maritime Affairs (MOMA) moved a summary for the ECC on 28-01-2019 proposing exemption/amendment in 17 clauses of the Income Tax Ordinance 2001, the Sales Tax Act, the Federal Excise Duty and Customs Act under the concession agreement (CA) between Gwadar Port Authority (GPA) and China Overseas Ports Authority (COPHCL). The ECC in its meeting held on Feb 12, 2019 considered the summary and directed the Ministry of Maritime Affairs to review the proposed amendments/exemptions for Gwadar port and Gwadar Free Zone vis-à-vis tax concessions for Special Economic Zones (SEZs), in consultation with Finance Division, Planning, Development & Reform Division, Federal Board of Revenue (FBR) and Board of Investment (BoI) and resubmit a summary thereof to the ECC for further consideration.
Accordingly, a meeting of stakeholders was convened on March 4, 2019. At the outset, all the stakeholders agreed to the interpretation of Law & Justice Division with respect to separate and distinct character of Special Economic Zone under the SEZ Act 2012 and the Gwadar Free Zone under the Gwadar Port Concession Agreement. Further, the stakeholders deliberated upon the proposed exemption package and accordingly FBR conveyed its consent to the proposed amendments in Clauses 126A and 126AB (II-Schedule) of the Income Tax Ordinance 2001, serial number 102 (VI Schedule) of the Sales Tax Act 1990, condition-iii of the SRO.327(I)/2007 and issuance of Gwadar Free Zone Rules as per Custom Act 1969.
Subsequently, a meeting of stakeholders was convened on June 17, 2019 which was attended by representative from the FBR and the GPA and co-chaired by the secretary maritime affairs and the chairman FBR. During the meeting, it was concluded that the points on which difference of opinion will exist may be referred to the Law and Justice Division, which offered legal opinion after hearing both the FBR and representative of Ministry of Maritime Affairs. Accordingly, Ministry of Maritime Affairs requested the FBR to furnish composite viewpoint of FBR on the summary. In its response, the FBR on August 1, 2019 gave its consent on 12 clauses (out of which consent on some clauses have been given on the advice of Law and Justice Division) of the Sales Tax Act and FED, the Income Tax Ordinance and Customs Act.
However, the amendments in 5 clauses - 126 AC (regarding contractors in Schedule-II, section 153/159 regarding certificates exemptions) and 126 AC(regarding date/time of exemptions) of the Income Tax Ordinance 2001, serial number100C (VI Schedule) of the Sales Tax Act 1990 and permission of establishment of duty free shop in Gwadar Free Zone which was incorporated earlier in the summary to the ECC - have been withdrawn by the Ministry of Maritime Affairs as the concerned holder is not pressing for the same for the time being.
The foregoing in view, the proposed exemptions in the Income Tax Ordinance, Sales Tax Act and Customs Act as agreed by the FBR may be approved by the ECC of the Cabinet and FBR may be directed for the implementation accordingly.