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Export
promotion of electronic hardware and software
In
order to promote the export of electronic hardware and software,
a Unit, within the Export Promotion Bureau will be set up to
identify foreign business opportunities for Pakistani companies
and to advise on the appropriate marketing their products.
Optimum
utilization of available facilities operated by Government
departments
Government
research, development, industrial and educational organizations,
which are usually well endowed with research, testing
development and production facilities will make their equipment
available on a lease or rental basis to individuals and private
companies involved in innovative technology based activities.
Treatment
of R&D Expenditure
A
certificate will be issued to eligible companies by the Ministry
of Science & Technology stating that a project is a R&D
project, then 20% of gross earnings will be allowed to be spent
towards R&D project.
Support
from domestic buyers of electronic equipment
The
Government Departments will draw up functional specifications
for electronics products to encourage their local production. In
addition, a price preference of 15% will be given to local
electronic products by these Departments.
Fertilizers
The
plant and machinery which are not manufactured locally and are
imported for the expansion of the existing units or to set up
new units are exempted from customs duty in excess of 15% ad-valorem
and from the whole of sales tax.
Pharmaceuticals
Plant
and machinery, not manufactured locally, imported for the
manufacture of pharmaceutical raw materials for such chemicals
which are available in the international market without any
franchise are exempted from so much of the customs duty as is in
excess of 25% ad valorem and whole sales tax.
Pharmaceuticals
Raw Materials
1.
10% import duty and sales tax on import of plant, machinery
& equipment which is not produced locally and is required
for basic/semi basic manufacture of drugs.
2. Duty and tax free import of all raw materials and chemicals
similar to what has been notified for imported raw materials
used in formulating drugs.
3. Tariff protection for basically manufactured raw materials by
deleting the basic raw materials from the SRO meant for duty
free imports. This protection would be provided as and when
production starts.
4. Basic/semi basic pharmaceutical manufacturers will be
exempted from sales tax.
5. For the establishment of basic/semi basic manufacturing
plants, loans would be provided on the basis of debt equity
ratio of 70:30.
6. Adequate tariff protection will be given to the basic/semi
basic manufacture against import of finished drugs. In case of
general decline in import duty regime, the same level of
protective duty shall be maintained as before, both in respect
of import of raw materials and finished drugs.
Mining
Income
of an industrial undertaking set up between 1st July 1981 and
30th June 1998, engaged exclusively in the exploration and
extraction of mineral deposits, other than petroleum, as may be
specified by the Federal Government, is exempted from income tax
for a period of five years beginning from the month in which
commercial production commences. The specified mining-machinery
and equipment imported by a mining industry, approved by the
Federal Government or provincial government, is also exempted
from customs duty in excess of 25% ad valorem and whole of sales
tax.
Hotel
& Tourism Industry
(Including
recreation, amusement, aviation, adventure tourism,
mountaineering, water sports, etc., both inland and island)
1.
Hotels, Tour operators, tourism and recreation related projects/
facilities will continue to enjoy the status of an industry, as
accorded in the Tourism Policy, 1990, and be considered as
industrial undertakings.
2.
Accelerated Depreciation Allowance (ADA) as available to
industrial units for income tax purposes, will also be available
as follows:
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Description
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ADA
(%)
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Building
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10
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Furnitre,
plant & Equipment
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25
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3.
LMM credit financing shall be available to hotel/tourism
industry as well as tour operators. The State Bank would issue
guidelines to Banks/DFIs in this regard.
4. The Development Authorities, while calling for the bids for
land disposal for hotels and tourism projects would first
pre-qualify the genuine investors and new comers who will also
be required to submit a feasibility study at the time of
pre-qualification. Final bidding would be held among these
pre-qualified parties. The cost of land would be payable in easy
instalments. Land developing authorities would earmark plots for
hotel and tourism projects in the master plan and if the land is
not developed within the specified time by their allottees,
their allotment shall stand cancelled. The state owned
land/property or the evacuee property will also be made
available for hotel and tourism projects on the same basis.
5. The complimentary rooms are presently subject to central
excise duty. SInce the complimentary rooms are used for the
purpose of sales promotion, these will be exempted from the levy
of central excise duty only on a maximum of 5% of total
available rooms, for five/four Star hotels.
6. Industrial tariff would be applicable in case of electricity
as is being done by the Gas Companies.
7. The facilities/incentives for Deemed Export Status, as
envisaged in the Tourism Policy of 1990, will be implemented and
made available to hotel and tourism projects (including tour
operators), as follows:
(i). The foreign exchange earnings of hotels, tour operators and
other tourism projects be entitled to same rebate in income tax
as available to exporter.
(ii). 5% of the foreign exchange earnings shall be allowed to be
spent on opening of offices abroad.
(iii). They would be allowed to pay service charges to foreign
travel agents and marketing companies out of their own foreign
exchange earnings.
Agro-Food
Industry
Industries/Criteria
The
following industries are reckoned as agro-food processing
industries:
1.
Agriculture
2. Horticulture
3. Cattle and sheep farming, the production and processing of
meat, milk, and related dairy products.
4. Processing, canning, packing, grading, and preservation of
fruits and vegetables.
5. Inland farming and preservation of fish particularly in water
logged and saline areas.
6. Production and multiplication of high yielding seeds,
7. Edible oil extraction
8. Poultry farming, poultry processing and pultry feed
9. Cattle feed
10. Milk processing
Incentives/concessions
·
The imported plant and equipment not manufactured locally, shall
be subject to custom duty of 10% with complete exemption from
sales tax.
· Income tax structure of projects in agro-food industry will
be entitled to debt-equit ratio of 70:30. Projects will be
entitled to financing from all banks and development finance
institutions.
· The project shall enjoy 50% exemption from the central excise
duty, on production, for 5 years from the date of commencement
of commercial production.
· Expatriate personnel of the units will be entitled to import
their personal effects, excluding motor vehicles, free of duty
and taxes in accordance with the personal baggage "Transfer
of Residence Rules". They will also be allowed to import
food items and other consumable without any duty/taxes up to US
$600 per person per year, and on payment of duty/taxes up to US
$2000 per person per year.
· Import of breeding stock will be allowed subject to an import
duty of 10%.
· Locally manufactured machinery will be provided credits under
the LMM credit line.
· The projects may be exempted from provincial, Municipal taxes
for 5 years from the date of commencement of commercial
production.
· Parts and components up to 5% of initial C&F value of
imported plant and equipment shall be imported at 10% duty if
imported together with the plant.
Petro
Chemical Industry
Manufacture
of Poly Vinyl Chloride (PVC)
1.
Import duties on the import value of various intermediary
products for the manufacturing of PVC will be fixed as:
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Polyvinyl
Chloride
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30%
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Vinyl
Chloride Monomer (VCM)
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20%
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Ethylene
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15%
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2.
Customs duties on the imported value of machinery for PVC shall
be levied at 10%. No sales tax will be levied on locally
fabricated or imported machinery.
3.
Complete exemption from duty and sales tax on imported plant or
machinery, for the installation of units for the manufacturing
of PVC from indigenous raw material, provided letters of credit
are opened up to 30th June 1996 as admissible for projects to be
established in Special Industrial Zones (SIZs).
4.
Exemption for sale tax on the purchase of locally manufactured
machinery and equipment.
5.
LMM credit would be available for the purchase of locally made
machinery.
Manufacture
of Pure Terephthalic Acid (PTA)
1.
The tariff on the import of paraxyline be fixed at 5% for a
period of 5 years till paraxyline manufacture locally, whichever
is earlier, after which the full duty of 10% will be payable
with the duty on PTA be 25%.
2. The import of machinery will be exempt from levy of sales tax
instead of refunding it in 24 monthly installations.
3. Projects will be allowed to import of water desalination
plant duty free.
4. For petrochemical and key industries, the terminal year for
the levy of 10% import duty on machinery not produced in the
country be advanced to 30th June, 1996 instead of 30th June
1999.
5. The wood pulp imported for use in manufacture of filter tow
for manufacture of cigarettes be taxed at 10% of the value and
filter tow at 25% of the imported value, as envisaged in the
tariff reforms for the terminal year 1996, thus maintaining a
duty differential of 15% between its raw material and finished
goods.
Incentives
for Development of Infrastructure Power
1.
Current installed capacity of power generation is 12,530 MW
(4,825 MW of Hydel and 7,568 MW of Thermal).
2. Electricity is available to only 40% of the population.
3. Per-capita consumption per annum is 300 Kwh/year.
4. Average annual increase in demand is 8%.
5. Additional generation capacity of about 54,000 MW would be
required up to year 2018.
6. Minimum additional requirement for 1995 has been 900 MW.
Increase to 1300 MW in the year 2000 and 5000 MW in 2018.
7. Energy generated by the private projects will be purchased in
bulk by the public sector utilities agencies like Water and
Development Authority/Karachi Electricity Supply Corporation.
Concession period up to 30 years is allowed for projects being
set up under Build Operate, own transfer/Build own transfer
(BOOT/BOT) arrangements; purchase of power generated by private
projects for the public sector utilities agencies, will be
guaranteed by the government of Pakistan. The investors are,
therefore, assured of a stable market;
8. Performance of public sector fuel supplies will also be
similarly guaranteed by the government;
9. bulk tariff for the sale of electricity will be worked out on
the basis of 60% annual plant factor. A portion of the tariff
covering the fixed operating costs will be designated as the
capacity charge, and will be paid on monthly basis irrespective
of the amount of energy purchased. The balance of tariff will
represent the energy charge and will vary according to the
quantity of energy purchased;
10. suitable escalation will be provided for the basic price of
energy, taking into consideration the key inputs only, e.g.,
fuel, labour and spare parts, etc.;
11. a special fund titled the Private Sector Energy Development
Fund (PSEDF) has been established with the assistance of
international donor agencies, which provides financing up to 40%
of the capital cost of the project. Loans from the funds may
have a maturity of up to 23 years, with grace period of up to 8
years. Currently the applicable interest rate is 14% per annum
including exchange risk premium;
General
provisions relating to fiscal and tax treatment are as follows:
1. private sector power project companies are exempted from the
corporate tax;
2. power projects are allowed to import capital equipment
without payment of customs duties;
3. repatriation of equity alongwith dividends is allowed freely;
and
4. power projects can obtain exchange risk insurance on standard
terms from the State Bank of Pakistan on foreign loans. The
premium will be passed through the tariff.
5. Adequate institutional arrangements have been made to
facilitate the handling of private power proposals. A Private
Power and Infrastructure Board (PPIB) has been established in
the Ministry of Water and Power. Similar bodies have also been
created in the Water and Power Development Authority and in the
National Development Finance Corporation.
Power
Generation
1.
Machinery and equipment, including coal mining equipment, not
manufactured locally, is exempted from whole of custom duty and
sales tax if imported for setting up or for balancing,
modernization, and extension of power generation i.e., oil, gas,
coal, wind and wave energy projects, including under
construction projects.
2. Raw materials and components, as are not produced or
manufactured locally and are imported for use in the manufacture
of machinery, equipment, intermediary or capital goods and
specialized vehicles (4 x 4 non-luxury i.e. without air
conditioner and other accessories) excluding passenger vehicles
to be supplied to electric power generation, i.e., oil, gas,
coal, wind and wave energy projects for their expansion or
modernization including under construction projects exempt from
customs duty and sales tax.
Petroleum
Sector
1.
Machinery, equipment, materials, specialized vehicles,
accessories, spares, chemicals and consumable (as are not
manufactured locally) can be imported free of customs duty and
sales tax by petroleum sector companies.
2. Raw materials and components for use in the manufacture of
machinery; equipment, materials, specialized vehicles,
accessories, spares, chemicals and consumable are exempted from
whole of custom duty and sales tax.
Oil
1.
all plicantions for exploration licenses are decided within 60
days, the disputed or contested applications will be decided
with a maximum period of 120 days;
2. expeditious and equitable disposals of applications is
ensured through a standing committee in the Ministry of
Petroleum and Natural Resources on which all the concerned
federal and provincial organizations are represented;
3. the sharing in concession i.e., shouldering exploration cost
and acquiring share in development is done on the basis of
competitive bidding;
4. local companies are encouraged to invest with the foreign
companies and OGDC in exploration;
5. foreign exchange requirements of exploration companies which
paid their share of oil/gas in local currency are fully met by
the government;
6. the import of drilling rigs, logging trucks, siesmic
equipment, well cementation equipment, and snubbing units, all
equipment's for exploration, development and production
off-shore is duty free;
7. the equipment imported for enhanced oil recovery is also
subject to the same concessionary rate of duty. All other
machinery is subject to 5.25% duty. Moreover, the exploration
companies are entitled to all such benefits as are admissible on
its export for the use of locally manufactured machinery and
equipment.
8. the price of non-associated gas is at par with the high
sulphur fuel oil price less such discounts as may be negotiated
at the time of signing the concession agreements;
9. the price of LPG is linked to its international price with
appropriate discount to encourage its local production
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