The Finance Act (FA) 2024 brings welcome news for businesses and residents in the former Federally Administered Tribal Areas (FATA) regions of Pakistan. The Act extends existing sales tax exemptions, originally set to expire on June 30, 2024, for another year until June 30, 2025.
What Exemptions Are Extended?
Previously, a range of supplies and imports in the ex-FATA regions enjoyed complete exemption from sales tax. These exemptions included:
- Supplies of goods meant for consumption within the ex-FATA regions
- Imports of plant, machinery, and equipment for installation in the ex-FATA regions
- Imports of industrial inputs by industries located within the ex-FATA regions
- Electricity supplies to residential and commercial consumers in the ex-FATA regions
- Electricity supplies to specific industries in the ex-FATA regions (excluding steel and ghee or cooking oil industries) established and operational before March 31, 2018.
Impact of the Extension:
The FA’s extension of these exemptions provides continued tax relief for businesses and residents in the ex-FATA regions. This helps to:
- Reduce the cost of living for residents by keeping essential goods and services affordable.
- Boost economic activity in the region by lowering production costs for businesses.
- Encourage investment and development in the ex-FATA regions by offering a more attractive tax environment.
What Changed?
The Federal Board of Revenue (FBR) had initially proposed introducing a reduced sales tax rate on these previously exempt supplies and imports. However, the FA overrules this proposal and extends the complete exemption for another year.
Conclusion:
The extension of sales tax exemptions for the ex-FATA regions demonstrates the government’s commitment to supporting economic growth and development in this area. This tax relief should benefit both businesses and residents, fostering a more vibrant and prosperous economy.
