PESHAWAR: The Peshawar High Court on Monday stopped the Federal Board of Revenue (FBR) from levying sales tax under the recently passed Finance (Supplementary) Act, 2022, on the imports of an industrial unit situated in an export processing zone (EPZ).

A bench consisting of Justice Ijaz Anwar and Justice Syed Arshad Ali fixed March 22 for the next hearing into a petition of the Ameen and Brothers Enterprise against the withdrawal of exemptions from the levy of sales tax on imports and exports of items by units situated in the EPZs.

The petitioner requested the court to declare illegal the Finance (Supplementary) Act 2022’s Section 3’s sub-section 8(a)(i) through which Entry No. 102 of the Sixth Schedule of the Sales Tax Act, 1990, had been removed.

It claimed that by omitting that entry, the exemption from sales tax earlier available on import and export of different items in EPZs had been withdrawn.

Stays imposition of sales tax on industrial unit

The bench also issued notices to the respondents, including federal secretaries of finance and industries, and FBR chairman, asking them to respond to the petition on the next hearing.

It directed the FBR not to impose sales tax until next date on the items imported by the petitioner falling under the impugned provision of the Finance (Supplementary) Act, 2022.

Advocate Babar Khan Yousafzai appeared for the petitioner and said the EPZ Authority was created under the EPZ Authority Ordinance, 1980, for the planning, development and managements of special zones for facilitating the investors in a particular area to increase exports of different products with zero percent duty on imports as well as exports.

He said his client had invested huge sum of money in setting up an industrial unit at the Risalpur EPZ, which was engaged in the business of imports of raw material, manufacturing of different items and exporting 100 percent of the products with zero per cent levy up until the government enacted the Finance (Supplementary) Act, 2022.

Mr Yousafzai said through the impugned provision of the said Act, amendments were also made to the Sales Tax Act, 1990, and the exemption of sales tax was done away with.

He said earlier, the exemption of sales tax was granted on import of machinery, equipment and materials either for exclusive use within the EPZs or for making exports therefrom.

The lawyer said after the enactment of the said Act, the imported goods of the petitioner were lying at the port in Karachi where the government had been demanding 17 per cent sales tax, which the petitioner was previously exempted from.

He contended that the petitioner had invested huge sum of money in his unit in the light of the schemes introduced by the government through different SROs from time to time including SRO NO 881(1)/802308 whereby the exemption from payment of taxes had been granted to industrial undertakings in the EPZs.

The counsel argued that his client was not even registered with the sales tax department, therefore, there was no mechanism provided to make payments on account of sales tax or to claim refund of the paid amount in due course of time.

He requested the court to stop the respondents, including the FBR, from implementing the impugned provision of the Finance (Supplementary) Act, 2022, until the final disposal of the petition.

Published in Dawn, February 8th, 2022