ISLAMABAD: The government on Thursday approved further tax concessions for two infrastructure projects of the China-Pakistan Economic Corridor by relaxing the construction machinery definition but deferred a decision on reducing re-lending rates on loans obtained for two nuclear power plants.
The Economic Coordination Committee (ECC) of the cabinet, which met with Finance Minister Ishaq Dar chairing proceedings, approved tax exemptions for two Chinese firms – the China State Construction Company Engineering Company (CSCEC) and the China Communication Construction Company (CCCC) – that are working on two infrastructure projects.
The ECC also waived off duties and taxes on import of Salter scales for lady health workers amid questions over its authority to grant such exemptions. The ECC has the powers to take decisions on taxation matters under certain conditions and the Salter scales case apparently does not qualify for such exemptions.
The ECC took these decisions on the day Supreme Court of Pakistan barred the government from taking decisions on fiscal matters without the approval of the federal cabinet. The ECC on Thursday changed the definition of construction machinery by including dumpers and special purpose motor vehicles to give more benefits to the Chinese firms.
The fresh exemptions are over and above Rs33 billion tax benefits that the ECC extended to these companies last month.
The Chinese firms are working on Sukkur-Multan section of the Lahore-Karachi motorway and Thakot-Havelian section of the Karakoram Highway under the CPEC. The exemptions have been given under the Framework Agreement the two countries had signed when Chinese President Xi Jinping visited Pakistan last year. Like last time, the Finance Minister had given anticipatory approval to waiving duties and taxes in his capacity as chairperson of the ECC on August 3.
The ECC just stamped the Finance Minister’s earlier decision. In its summary, the Ministry of Communication had sought urgent decision on inclusion of dumpers and special purpose motor vehicles on the grounds that 400 articles of construction machinery and equipment were lying on the port waiting for exempted clearance and 200 more would soon arrive.
The Federal Board of Revenue on Thursday issued a notification to exempt these two companies from the levy of withholding tax – the third such notification. The government has already issued notifications for giving effect to sales tax and custom duties exemptions.
PAEC re-lending rates
The ECC deferred a decision on a request of Pakistan Atomic Energy Commission (PAEC) to reduce re-lending rates that the federal government was charging on the loans that it obtained from China for construction of Chashma Nuclear power plant, CIII and CIV.
The government obtained these loans at an average rate of 3.18% but re-loaned to PAEC at 15% like all other departments and provinces. The 15% rate included exchange rate loss risk. However, the ECC deferred the decision, as the government was in the process of finalising new re-lending policy.
The PAEC was seeking reduction in rates on the plea that 15% re-lending rate would increase Chashma nuclear power plants per unit cost to 16.12 cents, which was 86% higher than the approved levelised generation tariffs of these plants that have 680MW generation capacity.
The ECC approved to reduce the sale of imported urea available at the National Fertilizer Marketing Limited (NFML) at Rs1,310 per 50 kg bag -a reduction of Rs476 per bag. The decision is aimed at supporting the agriculture sector that witnessed negative growth last year.
The ECC exempted customs duty and sales tax on import of Salter scales for Lady Health Workers Programme. The UNICEF has provided $1.3 million available under the Gavi HSS-I fund which will be utilized to purchase approximately 38,000 Scales and other equipment.
As a step towards cleaner environment and better engine hygiene, ECC allowed the introduction of 92 Research Octane Number (RON) premium motor gasoline (petrol) in Pakistan. Currently the country was using 87 RON premium which is almost abandoned by the world. The new arrangement will be effective from the next cycle of PSO tender in this year. The new cleaner and efficient fuel will have lower emissions.