Tax exemptions surged to Rs. 3.879 trillion during the outgoing fiscal year 2023- 2024 (FY24).
The Pakistan Economic Survey 2023-24 showed that the cost of tax exemptions continued their upward trend because of exemptions on petroleum products and the automobile sector.
Tax exemptions are the revenues foregone by the state by granting exemptions under different categories to various industries and other groups.
In FY24, the government gave massive relief on petroleum products, general exemptions including the automobile sector as well as CPEC, exports, and local supplies.
The income tax exemptions during FY24 were recorded at Rs. 476 billion. The income tax exemptions included Rs. 57 billion on government income, Rs. 5.9 billion on deductible allowance, Rs. 24 billion tax credits, Rs. 293 billion exemption from local income, Rs. 25 billion reduction in tax rate, Rs. 4.2 billion reductions in tax liability, Rs. 62 billion exemptions from specific provisions and Rs. 3 billion on account of SRO-related exemptions.
Sales tax exemptions were recorded at Rs. 2.8 trillion in FY24, mainly due to exemptions under the sixth schedule on imports. The cost of exemption of zero-rating under the fifth schedule was recorded at Rs. 206 million.
Exemptions on import and local supply of items placed under the sixth schedule of the Sales Tax Act were recorded at Rs. 214 billion and Rs. 461 billion
Other exemptions under sales tax included Rs. 33 billion on cellular mobile service, Rs. 208 billion on additional tax, Rs. 1,257 billion on petroleum products on local supplies, Rs. 81 billion on petroleum products imports, Rs. 8 billion on local supplies and Rs. 25 billion on zero rating of various sections.
The Customs exemptions were recorded at Rs. 543 billion which include Rs. 34 billion Chapter 99 exemptions, Rs. 44 billion FTA and PTA, Rs. 190 billion on the fifth schedule, Rs. 146 billion on the automobile as well as CPEC and Rs. 127 billion on exports.
Overall, during the outgoing fiscal year tax expenditure on income tax was Rs. 476 billion income tax, on sales tax Rs. 2,858 billion, and on customs duty on Rs. 543 billion.
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