This blog is written by Mr. Ikram Ul Haq, BFP ACA – England and Wales, Manager Taxation and Accounting Services. Please read this blog and provide your valued comments.

Income Tax and Sales Tax in FATA and PATA post 25th amendment to the constitution of Pakistan

The purpose of this blog is to discuss exemption available to Federally Administered Tribal Area (hereinafter referred as “FATA”) and Provincially Administered Tribal Areas (hereinafter referred as “PATA”) after twenty fifth amendment to the constitution of Pakistan, assented by National Assembly on May 24, 2018.

Income Tax on purchase of goods in FATA and PATA;

Income tax has been exempted in FATA and PATA wide clause 109A of Part IV, Second schedule of ITO, 2001. Income tax exemption is available to individuals having domicile of tribal areas and also to companies or AOP’s who resides in tribal areas. The relevant clause has been reproduced hereunder for ease of reference;

Quoted” The provisions of sections in Division III of Part V of Chapter X and Chapter XII of the Ordinance for deduction or collection of withholding tax which were not applicable prior to commencement of the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018) shall not apply to individual domiciled or company and association of persons resident in the Tribal Areas forming part of the Provinces of Khyber Pakhtunkhwa and Balochistan under paragraph (d) of Article 246 of the Constitution with effect from the 1st day of June, 2018 to the 30th day of June, 2023 (both days inclusive). “Unquoted

Sales Tax on Goods in FATA and PATA:

Exemption from sales tax on goods (in FATA and PATA) has been granted vide clause 151 of Sixth schedule of Sales Tax Act, 1990. The relevant clause has been reproduced hereunder for your ease of reference;

Quoted”

(a) Supplies; and

(b) imports of plant, machinery, equipment for installation in tribal areas and of industrial inputs by the industries located in the tribal areas, as defined in the Constitution of Islamic Republic of Pakistan,−

as made till 30th June, 2023, to which the provisions of the Act or the notifications issued thereunder, would have not applied had Article 247 of the Constitution not been omitted under the Constitution (Twenty-fifth Amendment) Act, 2018 (XXXVII of 2018):

Provided that, in case of imports, the same shall be allowed clearance by the Customs authorities on presentation of a post-dated cheque for the amount of sales tax payable under the Sales Tax Act, 1990, and the same shall be returned to the importer after presentation of a consumption or installation certificate, as the case may be, in respect of goods imported as issued by the Commissioner Inland Revenue having jurisdiction:

Provided further that if plant, machinery and equipment, on which exemption is availed under this serial number, is transferred or supplied outside the tribal areas, the tax exempted shall be paid at applicable rate on residual value. “Unquoted

Sales Tax on Services in FATA and PATA:

KPRA granted exemption (vide notification No. KPRA/GN/2019/534-538 dated March 15, 2019) from the whole of sales tax leviable to the service providers in FATA and PATA subject to the following conditions, namely:-

  1. The service providers are the bonafide residents of,
  2. Their service providing businesses are located in, and
  3. They are providing services for consumption exclusively within the territory of, the said areas;

The exemptions under this notification shall not apply on telecommunication services.

These exemptions are valid till June 30, 2023.

 

Ikram Ul Haq

BFP ACA – England and Wales

Manager Taxation and Accounting Services