ECC Ready to Present Draft for Amendments in Tax Exemptions Laws for Gwadar Port and Free Zone

Economic Coordination Committee (ECC) has finalized an initial recommendations’ draft to carry out amendments to laws concerning tax immunities for the Gwadar port and free zone. The Cabinet’s sub-committee, ECC formed on Aug 28, was instructed to find a legal cover for Gwadar’ tax exemptions. It was the first meeting of ECC chaired by Minister for Law and Justice Farogh Naseem. A mechanism was evaluated in the meeting for exemptions from income tax, sales tax and customs duties to Gwadar free zone and port through an amendment to laws. After parliament’s approval, legal changes would be implemented, and then the FBR would officially issue the rules.

ISLAMABAD: The Economic Coordination Committee of the Cabinet’s (ECC) sub-committee has prepared an initial draft of recommendations for implementation of amendments to laws regarding tax exemptions for the Gwadar port and free zone.

The sub-committee was formed to find a way to provide legal cover to the tax exemptions after a meeting of the ECC held on August 28, 2019, decided to do so.

Sources said a sub-committee meeting, chaired by Minister for Law and Justice Farogh Naseem, was held on Saturday.

Secretary finance, secretary commerce, secretary planning, Cabinet Division special secretary, the Federal Board of Revenue chairman and Board of Investment chairman along with other top officials were in attendance.

According to the documents available with The Express Tribune, the meeting examined the mechanism for amendments to laws aimed at providing exemptions from income tax, sales tax and customs duties to Gwadar free zone and port. Providing legal cover through statutory regulatory orders was also discussed.

The Ministry of Maritime Affairs also presented its recommendations.

Sources said the draft of the amendment bills regarding the tax laws would be presented in parliament for approval, adding that in places where there was no amendment required, SROs would be issued and exemptions would be given in duties and taxes.

After approval from parliament, these amendments would be implemented and then the FBR would officially issue the rules.

Sources said it was the first meeting of the sub-committee formed by the ECC and chaired by the law minister.

The Ministry of Maritime Affairs cancelled permission for establishing a duty-free shop at Gwadar free zone. On tax exemptions and facilities at the Gwadar Port Authority and China Overseas Port Holding Company Ltd (COPHCL), the FBR had not objections under the agreement.

Sources said, “The FBR’s objections over the recommendations have been removed. The earnings of the COPHCL and its operating companies from the Gwadar port and free zone have been exempted from income tax.”

It was informed during the meeting that after the clarification of the Law Division, the Gwadar International Terminals Limited and Gwadar Marine Services Limited would be given exemption from customs duty on import of items.

On the basis of export processing zones, the Gwadar free zone was being given the zero-rated facility and the Gwadar port operating companies and the taxpayers earning profit from the Gwadar free zone were being given tax exemptions.

In its remarks on the summary of the Ministry of Maritime Affairs presented during the meeting, the FBR said, “There is a recommendation to include a new serial – 100 D – in table one of the Sixth Schedule of the Sales Tax Act 1990.”

The bureau said, “The new serial also recommends sales tax exemption on import of items, equipment, machinery and material used by the investors for warehouses in the Gwadar free zone.