Latest news with #FinanceAct2024
Business Recorder
4 days ago
- Business
- Business Recorder
Pakistan telecom sector seeks sales tax reduction on services
ISLAMABAD: Telecom sector has proposed the government to reduce sales tax on telecom services from the current 19.5 percent - highest compared to other sectors to 16 percent in the upcoming budget 2025-26, besides harmonise across the country whereby all provinces and federal capital should have same rate. IT and Telecom sector submitted the budget proposals to the government which also proposed Advance tax may be reinstated to improve the purchasing power of customers as majority of the customers are below taxable limit. The sector proposed abolishment of advance income tax at 10% under Section 236A of ITO 2001 on auction of new or renewal of Telecom licenses, while justifying that Advance tax on auction of license inflates the cost of doing business and cost of capital for telecom sector, hindering 4G/5G and rural expansion. The proposals maintained that Cellular Mobile Operators are subject to deduction/collection of withholding of income tax on large number of transactions e.g. electricity bills of cell sites which are thousands in numbers as a result this increases the cost and complexity in compliance and an additional administrative burden for the telecom sector. Verification of claim of this tax collection on bills by tax authorities is also not possible and can save authorities from operational burden. Further, withholding tax deducted from telecom services is treated as minimum tax which is against the principle of taxation as this is payable even in loss making years. Further, current recovery measures are very harsh creating business disruptions and shaking taxpayers' confidence. The sector proposed the exemption from deduction/collection of withholding taxes by adding a clause in 2nd Schedule of ITO 2001. In case of acceptance of this, proposals mentioned at point b and c below will be redundant. They further proposed that withholding tax on telecom services at 4% u/s 153 to be adjustable instead of minimum tax. The shift from an adjustable income tax to a minimum tax has effectively reclassified income tax from a direct tax to an indirect tax. This is because the amount of tax payable is no longer tied to the actual income earned, but rather a fixed charge that applies uniformly, irrespective of the company's profitability. The sector proposed for increase carry forward period of minimum tax credit u/s 113 from 3 years to 5 years and bring it back to the position prior to Finance Act 2024. Pay back period of telecom sector is very slow and it takes longer time to recover the return on investment ranging from 8 to 10 years. So limiting the credit to 3 years is not sustainable for loss making companies, they added. The proposal also included removal of the regulatory duty rates on telecom power equipment which are not locally manufactured. Moreover, telecom services sector should be exclude from retail price list because they don't import the goods for direct sale. Aamir Ibrahim, CEO Jazz and Chairman Telecom Operators Association said that over-taxation of telecom not only hurts affordability for consumers, it also weakens investor confidence in a sector that requires constant innovation and infrastructure upgrades. Overburdening telecom sector with excessive taxation is not just economically counterproductive — it's socially regressive. We must recognise telecom as the digital backbone of every other sector and treat it as such in our fiscal policies,' said CEO Jazz while talking to this correspondent. Talking about the role of telecom in the country' digital future he said that connectivity today is as essential as roads and power grids. 'Telecom is the infrastructure that powers e-commerce, mobile banking, online learning, telehealth, and even public service delivery. Yet, we continue to treat it as a revenue stream instead of a strategic enabler. If we are serious about building a future-ready Pakistan, we need to start seeing telecom as a development multiplier, not a luxury,' he added. He further said that Pakistan's tax burden is disproportionately carried by a narrow group of compliant individuals and industries. To build a sustainable digital economy, we need to widen the tax net—bringing more participants into the formal economy — rather than repeatedly taxing those who are already contributing. Placing additional pressure on the formal, documented sectors, especially one as foundational as telecom, only discourages investment, slows innovation, and undermines long-term growth, he added. Ibrahim said that every tax on telecom is effectively a tax on opportunity. Whether it's a student in rural Balochistan attending a virtual class or a woman entrepreneur using mobile payments to grow her home business, digital access is a lifeline. A more forward-looking fiscal policy would reduce barriers to connectivity, making digital inclusion a reality for all Pakistanis. 'Telecom is not a luxury — it is a critical utility, much like electricity or clean water. It enables students to learn, entrepreneurs to sell, farmers to access market information, and patients to receive remote healthcare. Overburdening this sector with excessive taxation is not just economically counterproductive — it's socially regressive. We must recognize telecom as the digital backbone of every other sector and treat it as such in our fiscal policies', CEO Jazz added. Ibrahim further said that over-taxation of telecom not only hurts affordability for consumers, it also weakens investor confidence in a sector that requires constant innovation and infrastructure upgrades. A rationalized tax regime, coupled with efforts to document the informal economy, would yield more sustainable revenues for the state without compromising the growth of the digital ecosystem. Copyright Business Recorder, 2025
Business Recorder
4 days ago
- Business
- Business Recorder
Telecom sector seeks sales tax reduction on services
ISLAMABAD: Telecom sector has proposed the government to reduce sales tax on telecom services from the current 19.5 percent - highest compared to other sectors to 16 percent in the upcoming budget 2025-26, besides harmonise across the country whereby all provinces and federal capital should have same rate. IT and Telecom sector submitted the budget proposals to the government which also proposed Advance tax may be reinstated to improve the purchasing power of customers as majority of the customers are below taxable limit. The sector proposed abolishment of advance income tax at 10% under Section 236A of ITO 2001 on auction of new or renewal of Telecom licenses, while justifying that Advance tax on auction of license inflates the cost of doing business and cost of capital for telecom sector, hindering 4G/5G and rural expansion. The proposals maintained that Cellular Mobile Operators are subject to deduction/collection of withholding of income tax on large number of transactions e.g. electricity bills of cell sites which are thousands in numbers as a result this increases the cost and complexity in compliance and an additional administrative burden for the telecom sector. Verification of claim of this tax collection on bills by tax authorities is also not possible and can save authorities from operational burden. Further, withholding tax deducted from telecom services is treated as minimum tax which is against the principle of taxation as this is payable even in loss making years. Further, current recovery measures are very harsh creating business disruptions and shaking taxpayers' confidence. The sector proposed the exemption from deduction/collection of withholding taxes by adding a clause in 2nd Schedule of ITO 2001. In case of acceptance of this, proposals mentioned at point b and c below will be redundant. They further proposed that withholding tax on telecom services at 4% u/s 153 to be adjustable instead of minimum tax. The shift from an adjustable income tax to a minimum tax has effectively reclassified income tax from a direct tax to an indirect tax. This is because the amount of tax payable is no longer tied to the actual income earned, but rather a fixed charge that applies uniformly, irrespective of the company's profitability. The sector proposed for increase carry forward period of minimum tax credit u/s 113 from 3 years to 5 years and bring it back to the position prior to Finance Act 2024. Pay back period of telecom sector is very slow and it takes longer time to recover the return on investment ranging from 8 to 10 years. So limiting the credit to 3 years is not sustainable for loss making companies, they added. The proposal also included removal of the regulatory duty rates on telecom power equipment which are not locally manufactured. Moreover, telecom services sector should be exclude from retail price list because they don't import the goods for direct sale. Aamir Ibrahim, CEO Jazz and Chairman Telecom Operators Association said that over-taxation of telecom not only hurts affordability for consumers, it also weakens investor confidence in a sector that requires constant innovation and infrastructure upgrades. Overburdening telecom sector with excessive taxation is not just economically counterproductive — it's socially regressive. We must recognise telecom as the digital backbone of every other sector and treat it as such in our fiscal policies,' said CEO Jazz while talking to this correspondent. Talking about the role of telecom in the country' digital future he said that connectivity today is as essential as roads and power grids. 'Telecom is the infrastructure that powers e-commerce, mobile banking, online learning, telehealth, and even public service delivery. Yet, we continue to treat it as a revenue stream instead of a strategic enabler. If we are serious about building a future-ready Pakistan, we need to start seeing telecom as a development multiplier, not a luxury,' he added. He further said that Pakistan's tax burden is disproportionately carried by a narrow group of compliant individuals and industries. To build a sustainable digital economy, we need to widen the tax net—bringing more participants into the formal economy — rather than repeatedly taxing those who are already contributing. Placing additional pressure on the formal, documented sectors, especially one as foundational as telecom, only discourages investment, slows innovation, and undermines long-term growth, he added. Ibrahim said that every tax on telecom is effectively a tax on opportunity. Whether it's a student in rural Balochistan attending a virtual class or a woman entrepreneur using mobile payments to grow her home business, digital access is a lifeline. A more forward-looking fiscal policy would reduce barriers to connectivity, making digital inclusion a reality for all Pakistanis. 'Telecom is not a luxury — it is a critical utility, much like electricity or clean water. It enables students to learn, entrepreneurs to sell, farmers to access market information, and patients to receive remote healthcare. Overburdening this sector with excessive taxation is not just economically counterproductive — it's socially regressive. We must recognize telecom as the digital backbone of every other sector and treat it as such in our fiscal policies', CEO Jazz added. Ibrahim further said that over-taxation of telecom not only hurts affordability for consumers, it also weakens investor confidence in a sector that requires constant innovation and infrastructure upgrades. A rationalized tax regime, coupled with efforts to document the informal economy, would yield more sustainable revenues for the state without compromising the growth of the digital ecosystem. Copyright Business Recorder, 2025
Business Recorder
29-05-2025
- Business
- Business Recorder
Packaged milk and infant milks: Experts, stakeholders for reversing 18pc ST
ISLAMABAD: The experts and stakeholders from government, industry, and research institutions on Tuesday called for reversing 18 percent sales tax on packaged milk and infant milks in budget (2025-26). The pre-budget seminar has concluded for immediate reforms in the taxation regime affecting Pakistan's dairy industry to promote formalization, nutrition and growth. The Sustainable Development Policy Institute (SDPI) organized a focused policy dialogue titled 'Enabling Dairy Sector Transformation through Smart Taxation'. The Federal Board of Revenue (FBR) is finalizing proposals on dairy sector. Through the Finance Act 2024 the government withdrew zero-rating (Serial no.12(xvii) and 17 of the Fifth Schedule of the Sales Tax Act 1990) and imposed 18% GST on locally produced infant formula, baby food and fortified child nutrition products. Before that the locally produced preparations suitable for infants were eligible for zero-rating if the cost was within a threshold defined by the government. The FBR is reviewing this budget proposal to restore zero-rating on infant milks. The session, moderated by Zainab Naeem and organized as part of the Sustainable Development Policy Institute's (SDPI) pre-budget consultation series, aimed to finalize a joint statement and action plan to formalize the largely informal dairy sector through rational tax policies. In his opening remarks, Dr. Abid Qaiyum Suleri, Executive Director of SDPI, highlighted that despite contributing significantly to economic activity, over 90% of Pakistan's dairy sector remains undocumented and untaxed. 'Documentation of the economy is crucial not just for fiscal stability but also for tackling malnutrition and ensuring food safety,' said Dr. Suleri. He emphasized that the current tax policy – particularly the 18% GST on packaged milk – disincentivizes the formal sector and undermines both public health and economic development. Dr. Umar Farooq, Research Associate at SDPI, presented key findings from a policy brief. He revealed that the sales tax hike led to a 20% drop in packaged milk sales and closure of over 500 formal milk processing units, redirecting Rs1.3 trillion in revenue to the informal sector. 'This is a fiscal miscalculation. Globally, milk is taxed at an average of just 6%. Pakistan's 18% GST on packaged milk is a policy outlier that compromises health, nutrition, and livelihoods,' he stated. Representing the private sector, Muhammad Nasir of Friesland Campina Engro Pakistan stressed the sector's socio-economic importance, especially in rural areas. 'Dairy acts as a social safety net, yet our productivity remains among the world's lowest,' he said. Nasir also flagged Pakistan's alarming 40% stunting rate and warned that increased taxation on safe milk could worsen national nutrition indicators. Aatekah Mir from Nestlé Pakistan explained that the sales tax freeze has halted investment in milk conversion infrastructure. 'This tax was criticized across political lines,' she noted, adding that Nestlé and others are fully aligned with the SDPI's policy recommendations. Dr. Shehzad Amin, CEO of the Pakistan Dairy Association, called for a rational and uniform tax regime. 'No country taxes milk at 18% – the highest global rate is 9%. Safe milk is not a luxury, it's a right,' he asserted. He warned that shifting consumption from packaged to loose milk due to pricing pressures could severely impact public health and contribute to a stunted generation in the next five years. Dr Muhammad Anjum Iqbal, Animal Nutritionist at the Ministry of National Food Security and Research urged the government to incentivize quality milk production, highlighting the need for improving animal health, diet, and environment. During the questions and answers session, the experts emphasized the importance of pasteurization, certification, and infrastructure. Muhammad Nasir from Engro Pakistan reiterated that only registered and tested products were certified, and that modern safety protocols like those in the Netherlands were needed to combat zoonotic disease risks. Dr Shehzad Amin pointed out that 96% of milk samples from the informal sector are adulterated, compared to the formal sector's strict testing standards. 'Bringing the informal sector into the tax net could improve both revenue and milk quality,' he said. In conclusion, stakeholders unanimously called for immediate reduction of GST on packaged milk to 5%, recognition of milk as a nutrition-sensitive commodity, alignment of fiscal policies with health and nutrition goals, and promotion and protection of the formal dairy sector through public awareness and infrastructure development. Copyright Business Recorder, 2025
Express Tribune
17-05-2025
- Business
- Express Tribune
Refineries saved from further losses
Listen to article New Petroleum Minister Ali Pervaiz Malik has come to the rescue of oil refineries, which are facing losses of billions of rupees, in a move that will pave the way for investment of up to $6 billion in the refining sector. After becoming the petroleum minister, Malik also took measures to fully implement the facility of 35% allocation of locally explored gas to third parties. The issue had been pending for several years. The delay in implementing the Brownfield Refineries Policy 2023 had affected timelines for plant upgrade projects of the refineries, which sparked concerns among foreign investors and prevented them from making fresh investment. In the Finance Act 2024, petroleum products – motor gasoline (Mogas or petrol), high-speed diesel (HSD), kerosene oil and light diesel oil (LDO) – have been classified as "exempt". As a result, the refineries and oil marketing companies have to bear the cost of input sales tax (estimated at Rs34 billion for financial year 2024-25) and it cannot be recovered through product prices, which are regulated and fixed by the Oil and Gas Regulatory Authority. During the recent revision in oil prices, the government allowed refineries to charge Rs2.09 per litre on HSD and Rs1.09 per litre on petrol in order to recover Rs34 billion worth of losses over 12 months. The oil industry has hailed the decision and has given credit to the new petroleum minister and the petroleum secretary, who pleaded their case before the Economic Coordination Committee (ECC) and the prime minister for its resolution. Attock Refinery CEO and OCAC Chairman Adil Khattak told The Express Tribune that the petroleum minister had been very helpful in resolving the loss recovery issue with full support from the petroleum secretary. However, he said the sales tax exemption matter should be permanently resolved in the upcoming budget, adding that the current decision of the government to recover the losses of refineries and the resolution of GST issue would help secure investments of $6 billion in upgrading the refining sector. Pakistan Refinery Limited (PRL) was the first victim of the delay in implementation of the refinery policy because it failed to woo foreign investors for modernising its plants. It floated a tender to attract a contractor and financing for plant upgrade. The deadline for the tender was in December, but Chinese investors refused to participate until the government addressed the issues faced by the refineries. In the first tender, not a single investor participated in bidding. PRL has floated the tender for the second time, where the last date for submitting bids is May 30. However, industry officials say they are not hopeful that any investor will participate. Refineries are considered strategic national assets that play a vital role in energy security and economic development. Pakistan's refineries produce diesel in accordance with the specifications notified by the Ministry of Energy (Petroleum Division). The import of a single HSD cargo costs approximately $45 million, which is an unnecessary burden when adequate local supplies are available. The upgrading projects will help double diesel production in the country. Over the years, the refineries have been investing in modernisation, including capacity expansions and installation of Isomerisation and Diesel Hydro Desulphurization (DHDS) units, enabling them to improve fuel specifications. Currently, Pakistan's refineries produce HSD with sulphur content ranging from Euro I to Euro V. A refinery already produces the Euro V-compliant diesel, two refineries supply Euro III fuel and the remaining produce diesel with sulphur content of around 5,000 ppm, far lower than the reported figure of 10,000 ppm.
Arab News
05-05-2025
- Business
- Arab News
Pakistan's top oil refineries push ahead with investments, plant upgrades to boost domestic production
KARACHI: The chief executive officers (CEOs) of leading oil refineries on Monday called on Finance Minister Muhammad Aurangzeb and discussed with him investment plans, including multi-billion-dollar plant upgrades aimed at enhancing the domestic production capacity of petrol and diesel. Pakistan produces some petrol and diesel domestically, but it is not sufficient to meet the country's total demand. The country imports significant quantities of crude oil and refined petroleum products to supplement domestic production. Pakistan's five oil refineries have a combined capacity to process 450,000 barrels of crude oil per day. In the first four months of fiscal year 2025, petrol production was up by 4.50 percent and high-speed diesel by 7.85 percent, compared to the same period last year. This increase is attributed to rising demand in the transport and agriculture sectors. On Monday, a delegation a CEOs of top oil refineries briefed the finance minister and his team on their upcoming investment plans, which include multi-billion-dollar plant upgrades aimed at enhancing domestic production. 'The delegation highlighted that these upgrades, once implemented, have the potential to save the country close to $1 billion annually in foreign exchange by reducing reliance on imported refined fuels,' a statement from the finance division said. The refinery representatives also raised concerns regarding the change in the sales tax regime on petroleum products, specifically the shift from zero-rated to exempt supplies. 'They explained that this change has led to a significant increase in both operational and capital expenditure for the refining sector, adversely impacting the financial viability of their planned upgrades,' the statement added. This change in the sales tax regime, introduced by the Finance Act 2024, means that certain petroleum products like motor spirit (petrol), high-speed diesel, kerosene, and light diesel oil are now exempt from sales tax instead of being zero-rated. This change has raised concerns from refineries, who worry about increased operational and capital costs due to the disallowance of input sales tax claims. Aurangzeb assured the CEOs that the government would carefully review their concerns, especially those relating to the sales tax exemptions, and added that the issue would be addressed in a manner that supports the continued growth and modernization of the domestic refining industry. 'The meeting concluded with a reaffirmation of the government's commitment to enabling long-term investment in the energy sector and promoting sustainable industrial development,' the finance division said. Pakistan imported 137,000 barrels per day of crude in 2024, mostly light grades from the Middle East, with Saudi Arabia and the United Arab Emirates among its top suppliers, data from analytics firm Kpler showed. Oil imports amounted to $5.1 billion in 2024, data from Pakistan's central bank showed. In February, Saudi Arabia, through the Saudi Fund for Development (SFD), extended a $1.2 billion financing facility to Pakistan for the import of oil products for a year. The SFD has provided approximately $6.7 billion to Islamabad for oil products since 2019.
