ISLAMABAD: The Federal Board of Revenue (FBR) chief has directed officials to fix a quota on raw material imports according to the installed capacity of industrial units located in Khyber Pakhtunkhwa’s erstwhile federally and provincially administered tribal areas (i.e. Fata and Pata).

Presiding over a meeting of the Input-Output Coefficient Organisation (IOCO), FBR Chairman Ashfaq Ahmed asked the department concerned to complete the exercise by April 15, said an official announcement.

The meeting was informed that 140 units of steel, oil and ghee, plastics and textile, etc. were identified in Fata and Pata for a joint survey to determine their manufacturing capacity. Of these units, reports about 58 have been sent to the FBR and those of 20 more units were in the pipeline.

IOCO Director General said the survey and reports on the remaining units would be completed in a couple of weeks.

It was also decided that exemptions under the sixth schedule of the Sales Tax Act 1990 and the Income Tax Ordinance 2001 would not be available to these industrial units beyond their quota.

The meeting was informed that some of industrial units were delaying the exercise on frivolous grounds. However, once the exercise is complete, such units would not be allotted any quota to import raw materials.

At the time of the merger of Fata and Pata with KP in 2018, tax exemptions had been granted to these areas for five years, i.e. up to June 30, 2023.

Several industrial units located in these areas are manufacturing different goods, including iron and steel, plastic, ghee, textile and plastic.

These units import raw material by sea through Karachi ports without paying sales and income tax, but they are allowed to sell finished goods only in the newly merged districts, and not in the other districts of KP or other provinces.

To prevent the misuse of these tax exemptions, the FBR is taking different measures, including escorting containers from the Azakhel dry port to importers’ units.

Published in Dawn, April 3rd, 2022