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PESHAWAR: The Khyber Pakhtunkhwa government has decided to formally ask the federal government to exempt Fata and Pata from federal taxes, including sales tax on electricity and retailers, income tax on salary, capital gains tax on property and agriculture income tax, for five years after their merger with the province.

The decision was made during a consultative meeting attended by the provincial finance secretary, income tax chief commissioner, and Peshawar customs collector lately.

The meeting was called in line with the suggestion of the federal government’s committee on Fata reforms.

On May 31 after the merger of Fata with KP, the federal cabinet had proposed a package of tax exemption for both Fata and Pata.

However, the committee on Fata reforms emphasised that the cabinet’s decisions required elaboration to avoid complication in near future and therefore, the KP government should put up recommendations about it after consultation among relevant departments.

The consultative meeting agreed that there was no issue on the federal excise duty levied on imports.

KP decides to formally ask centre for relief

The participants said a few ghee mills in Pata approached the Peshawar High Court for exemption from FED but that was in the context of the now annulled Article 247.

They said no exemption might be granted on FED to provide a level-playing field to the local ghee industry.

The participants noted that owners of those ghee mills were reportedly not the bona fide residents of Pata.

The meeting also decided on the three months extension of the cutoff date for the provision of the data of the registration of non-customs paid vehicles in Fata and Pata.

It recommended that the registration data available with the civil administration up to June 30 immediately be shared with the Federal Board of Revenue, while for the remaining data be produced afterward but not more than seven days after the cutoff date.

The meeting proposed that exemption on customs duty only be granted to the vehicles, which didn’t enter through the notified customs stations.

The participants also said other than the issue of NCP vehicles since there was no demand even earlier for exemption on imports and exports and therefore, no such exemption was recommended.

They said the government could grant exemption separately to special economic zones or industrial estates as the case could be.

The meeting recommended sales tax exemption on electricity for domestic consumers and proposed that the federal subcommittee discuss exemption of sales tax on electricity for commercial consumers other than industrial.

It also suggested sales tax exemption for retailers.

The participants said currently, retailers having a turnover of more than Rs5 million were required to file sales tax details in rest of the country and there should be no limit to the retailers of Fata and Pata.

They however opposed immunity from withholding tax at import and export stage.

The meeting also proposed that income tax on salary, property, capital gains and income from other sources be exempted if the income arose of or accrued in Fata and Pata.

It said the urban immovable property tax would only be extended to both regions once the urban areas were notified in the schedule of the relevant Act.

The meeting also proposed tax exemption on agricultural income for both regions for five years. It said the excise and taxation offices were already working in Swat, Buner, Malakand, Upper and Lower Dir and Chitral and there was no need to bring any change.

Published in Dawn, July 7th, 2018