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Govt creates legal conundrum by taxing export processing zone

Meetings with finance minister, FBR chairman remain inconclusive

SAMAA | - Posted: Jan 13, 2022 | Last Updated: 3 days ago
Posted: Jan 13, 2022 | Last Updated: 3 days ago

Photo: SAMAA TV/File

The Finance (Supplementary) Bill 2021 or the mini-budget is about to create a legal conundrum for the federal government as for the first time goods being produced at the Export Processing Zone (EPZ) would also be taxed.

Taxing such goods goes against the Export Processing Zone Act 1980, exporters have said.

The supplementary finance bill proposes a 17% GST on machinery, equipment and raw materials imported to Pakistan to manufacture products at the EPZ. The tax is unlawful because all the products manufactured at the EPZ are exported back, says Irfan Ikhlas, an exporter.

Technically the government is not going to generate revenue from the EPZ as it would refund all the sales tax collected from the EPZ to the exporters after the goods have been exported.

However, it will create problems for the manufacturers and exporters as the GST will hold up their money. Getting a refund is also not easy, according to manufacturers.

The exporters have met with Finance Minister Shaukat Tarin and the Federal Bureau of Revenue Chairman Ashfaq Ahmed to discuss the issue. However, the meetings ended without an agreement.

Tarin claimed that the exporters were misusing the zero-rated tax regime by not exporting everything produced at the EPZ.

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One Comment

  1. Syed Razi Uddin  January 13, 2022 11:32 pm/ Reply

    Tarin knew well, what is wrong.

    EPZ generating billions by importing free and then disbursing same sales within country and cheaper rates in connivance with thugs.

    Another win-win situation is that Govt may reserve a bank / insurance guarantee, out of which refundable GST money will be automatically cashed after 7 days (or other days) of filing claim.

    If relevant customs / FBR feel that something fishy has occurred they can can still stop the payment within a week.

    Definitely opening a new Pandora / earning but better than no solution.

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