The National Board of Revenue has exempted the private power generation companies from payment of advance income tax on import of plant, equipment, construction materials, machinery and spare parts.
Income tax wing of the revenue board on Tuesday issued a statutory regulatory order in this connection.
Under the order, private power companies will enjoy the waiver from the payment of AIT at the rate of 5 per cent on the items imported at pre-commencement period of commercial production of the power plants.
The waiver, however, will be applicable for the power plants, both coal-based and fuel and gas based, which enjoy income tax exemption under the SROs issued by the NBR in 2013.
The revenue board through two SROs issued in 1997 and in 2000 waived all types of customs duty, value-added tax and supplementary duty on import of plants, equipments, erection materials, machinery and spare parts on some conditions.
The 2000-SRO fixed the import value of spare parts at the highest of 10 per cent of total value of imported plant and equipments.
The companies will also have to fulfil the conditions and have to give an undertaking on proper use of the imported items to enjoy the benefits.
Generally, import of capital machinery is exempted from payment of AIT but the tax remains applicable for the items.
On the other hand, power generation companies also enjoy tax holiday and income tax benefits for up to 15 years from the commencement of commercial production.
Officials said that investors in power producing companies could not adjust the paid AIT as they enjoy income tax exemption.
So, the AIT paid by the companies at import stage remains and would remain stuck at the tax authority for a long time, they said.
Describing the situation, some power companies sought exemption from the payment of the tax and the NBR allowed the benefit, they said.
Power plants which came into commercial production before December 31, 2014 are enjoying tax holiday for 15 years.
The plants came into commercial production after January 1, 2015 and those that will start commercial production before December 2024 will enjoy tax waiver at reduced rates for 10 years including full exemption for first five years.
Companies which will enter into an agreement with the government before June 2020 for setting up coal-based power plants will also enjoy tax holiday for 15 years from the date of commencement of commercial production.
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