Private power generation companies will enjoy exemption from payment of advance income tax (AIT) on import of power plants, equipment, erection materials, machinery and parts, according to a recent order of the revenue board.
The income tax wing of the National Board of Revenue (NBR) issued a Statutory Regulatory Order (SRO) in this regard, offering the waiver for all the coal, fuel oil and gas-based power producers.
Earlier, the companies had to pay 5.0 per cent AIT on the items imported in the pre-commencement period of the commercial generation by the power plants.
Generally, import of capital machinery for power plants is exempted from AIT, but the tax remains applicable for the items.
In 1997 and 2000, the revenue board issued two SROs by waiving all types of customs duty, Value Added Tax (VAT) and Supplementary Duty (SD) on import of plants, equipments, erection materials, machinery and spare parts subject to some conditions.
Under the existing income tax rules, power generation companies enjoy tax holiday and income tax benefits for up to 15 years from the commencement of commercial generation.
The power companies could not adjust the paid AIT in the tax returns as they enjoy income tax exemption, officials said.
Their paid AIT at import stage remained stuck up for years due to having no scope of adjustment, they added.
The SRO has been issued to resolve the complexities regarding payment of AIT, they said.
Following applications of some power companies seeking exemption from the payment of the tax, the income tax wing offered the exemption.
As per the income tax ordinance, 1984, power plants which came into commercial production before December 31, 2014 were enjoying tax holiday for 15 years.
Tax waiver has been offered at reduced rates for 10 years including full-exemption for first five years for the power plants that came into commercial operation after January 2015 and will start commercial operation before December 2024.
The tax holiday for 15 years, from the date of commencement, has also been offered for coal-based power plant companies on condition of entering into agreement with the government before June 2020.
Officials said a set of tax benefit has been offered by income tax, VAT and customs wings of NBR for facilitating power generation in the country.
