ISLAMABAD - In a major development the federal government has granted billion of rupees income tax, sales tax and custom duties exemptions, to cross borders Iran Pakistan and Turkmenistan Afghanistan, Pakistan India (TAPI) gas pipeline projects.

The exemption granted by the Economic Coordination Committee of the Cabinet would also be available to RLNG III Pipeline project (RLNG-III) or any other project declared as Large Diameter Gas Pipeline Project by the Ministry of Energy Petroleum Division.

The ECC granted these exemptions in its meeting held on 30th May 2018. According the minutes of the ECC meeting available with The Nation, in its summary the petroleum division requested the exemption from custom duty in excess of 5 percent ad valorem leviable under the first schedule to the Customs Act 1969 and whole of sales tax leviable under the Sales Tax Act 1990 on import and subsequent supply of plant, machinery, equipment, materials, specialized vehicles or vessels, accessories, spares, chemicals consumable as are not locally manufactured by developers, contractor and service companies of North South Gas Pipeline (NSGP), Turkmenistan Afghanistan, Pakistan and India (TAPI)gas pipeline, Iran-Pakistan Pipeline( IP), RLNG III Pipeline project (RLNG-III) or any other project declared as Large Diameter Gas Pipeline Project by the Ministry of Energy Petroleum Division.

Similarly exemption from custom duty in excess of 10 percent ad valorem leviable under the First schedule to the Customs Act 1969 and whole of sales tax leviable under the Sales Tax Act 1990 on import and subsequent supply of plant, machinery, equipments, materials, specialized vehicles or vessels, accessories, spares, chemicals consumable as are locally manufactured by developers, contractor and service companies of above projects was also requested by Petroleum Division.

Exemption from whole customs duty and sales tax on import and subsequent supply of HR coils, line pipe, pylons/pile, whether or not manufactured locally, by the developer and contractors of above projects was also requested.

Exemption from duties and taxes on import of machinery, equipment, vessels, dumpers, specialized vehicles, accessories, and spares and all other items essentially required for the above projects on import-cum-export basis for a period of five years, further extendable on payment of 1 percent surcharge per year was sought by the Petroleum Division.

Briefing about the background the petroleum division informed the ECC in its meeting held on 30th May 2018, that following the earlier ECC decision a committee was constituted to review the issue of exemption of taxes and duties to the gas infrastructure development projects of large diameters under secretary finance with Secretary Petroleum and Chairman FBR as its members.

After a comprehensive and thorough deliberation, FBR agreed to bring to the sales tax and custom duty exemptions for gas infrastructure development projects for large diameter i.e.24 or above parallel to the exemptions available to E&P Sector under SRO 678.

However, the proposal regarding the reduction in the custom duty exemptions to zero percent was not agreed by the FBR.

On the issue of ten years tax holiday for North South Gas pipeline project, its contractors, sub contractors from all types of income taxes, corporate taxes, minimum tax, alternate corporate tax, all types of withholding taxes and taxes of remittance of profit by branches of non-resident contractors and sub contractors, pertaining to the project was also rejected by FBR.

The ECC of the cabinet approved the proposal submitted by petroleum division regarding the exemption from income tax, sale tax and custom duty for petroleum and gas sectors and for large diameter gas pipeline projects.