Is Pakistan Railways eyeing modernisation?

The national rail utility is seeking a tax exemption on import of locos, rolling stock, and spare parts.

By Staff Reporter

ISLAMABAD: Pakistan Railways is seeking customs duty exemptions on import of machinery and equipment, an indication the behemoth national rail utility may be planning to undertake a modernisation or upgradation initiative soon.

If indeed granted, the exemption – to be applicable on the purchase of locomotives, rolling stock, and spare parts – will have an impact to the tune of tens of millions of rupees.

The Ministry of Railways in in touch with Federal Board of Revenue (FBR) to seek an exemption from Customs Duty of the kind earlier available to Pakistan International Airlines (PIA) on the import of aircraft and spare parts.

Federal Secretary Railways has written letter to the FBR with a request for exemption by placing certain important items under the Fifth Schedule to Customs Act 1969.

The letter argues that the Aviation industry is enjoying several tax incentives none of which are available to Railways, which is an important mode of transportation.

However, the request comes at a time when the Aviation Industry has been brought under the tax net with the abolition of a General Sales Tax (GST) exemption it enjoyed earlier.

The Economic Coordination Committee (ECC) of the Cabinet recently allowed Aviation Division to pay Sales Tax on the import of leased aircraft in instalments.

The ECC approved payment of GST at a rate of 17 percent to the tune of PKR 1.596 billion on a total rental value of PKR 9.388 billion of four A320 leased aircraft in monthly instalments over the lease term of 6 years starting from the date of arrival of aircraft. One of the aircraft has already arrived.

The official communication sent out by Ministry of Railways certified that imports of Railways related goods such as rolling stock, rails and allied parts under Railway Policy 2022 are the requirements of the Pakistan Railways. This exemption should be admissible on production of certificate by the Railways Division.

The items Railways is looking to import are neither included in Customs General Order nor manufactured locally as certified by Engineering Development Board (EDB).

The FBR currently charges Railways a 3 percent Customs Duty on any imports of goods specified in chapter 86. Currently there is no exemption available on items of Pakistan Railways.

The FBR has conveyed to Pakistan Railways through official response that in case concession to all the locomotives/engine parts imported by Railways is the intent of the government then the only legal way out is to introduce necessary amendments in the 5th Schedule to the Customs Act 1969.

This will require a money bill after due approval of the cabinet, and the Pakistan Railways has accordingly been advised to follow the requisite process.

Well-placed sources say Chairman FBR Asim Ahmad has taken up this issue and grant of the Railways’ request is under active consideration.

If the authorities do indeed decide to grant the exemption sought by the Railways, provisions to that effect will be incorporated in the budget ahead of its finalisation and subsequent approval by the National Assembly.