A representational image showing the FBR logo. — FBR website/File
- Sales tax break on petroleum products contributes to rise in cost.
- Exemptions amount to revenue loss of Rs1,496,124m in FY25.
- FBR suffered notable revenue loss of Rs985.594 billion in 2024-25.
ISLAMABAD: Apart from the missed growth target, the Pakistan Economic Survey 2024-25 unveiled by the government has revealed that Pakistan’s total tax exemption and concessions doled out to various sectors of the economy have gone up to Rs5.85 trillion in Fiscal Year 2024-25, The News reported on Tuesday.
Revealing the survey report, although Finance Minister Muhammad Aurangzeb said that the number of individual tax filers had doubled, he did not reply to the question about increasing the cost of tax exemptions despite claims that these were being abolished consistently in the last few years.
It is pertinent to note that the overall cost of tax exemptions has gone up to Rs5.84 trillion in 2024-25 against Rs3.87 trillion in 2023-24, reflecting an increase of Rs1.96 trillion. The cost of tax exemptions witnessed a surge by 50% during 2024-25 as compared to tax expenditure in 2023-24.
The sales tax exemption to petroleum products, duty concessions on imports, reduced rates of sales tax and overall sales tax exemptions on imports and local supplies were major contributors to the increased cost of exemptions during 2024-25. However, the Economic Survey did not incorporate the exemption cost provided to FATA/PATA Areas.
The single-largest contributor to the surge in sales tax exemptions was the exemption from sales tax on petroleum products through statutory regulatory orders (SROs), showing a massive revenue loss of Rs1,496,124 million during 2024-25. The sales tax exemption on the import of petroleum products caused a revenue loss of Rs299,640 million during this period.
The fixed sales tax regime on cellular mobile phones caused a revenue loss of Rs87,950 million in 2024-25 as compared to Rs33,057 million in 2023-24, showing an increase of Rs54,893 million.
The Federal Board of Revenue (FBR) suffered a revenue loss of Rs372 billion on account of sales tax exemption on imports during 2024-25 as compared to Rs214 billion during 2023-24, reflecting an increase of Rs158 billion.
Sales tax exemption on local supplies caused a revenue loss of Rs613 billion in 2024-25 as compared to Rs461 billion in 2023-24, reflecting an increase of over Rs152 billion. The cost of income tax exemptions amounted to 800.8 billion against Rs476.9 billion, showing an increase of Rs323.9 billion and the cost of customs duty exemptions was Rs785.8 billion in 2024-25 against Rs543.5 billion in 2023-24, reflecting an increase of Rs242.3 billion.
The Economic Survey does not mention revenue loss on account of exempt business income granted to independent power producers (IPPs). Similarly, the survey does not mention any revenue loss from capital gains. The accumulative revenue loss on account of tax credits amounted to Rs101 billion in 2024-25 against Rs24.374 billion in 2023-24, showing an increase of Rs76.627 billion.
The income tax exemption from special provisions of the Income Tax Ordinance has caused a revenue loss of Rs52 billion during 2024-25 as compared to Rs62.756 billion during 2023-24. The income tax exemption from total income has a revenue impact of Rs443.445 billion during the period under review.
The income tax exemption available to the deductible allowances caused a revenue loss of Rs16.4 billion in 2024-25 against Rs5.912 billion in 2023-24, showing an increase of Rs10.488 billion.
The reduction in income tax rates has revenue implications of Rs45 billion during 2024-25 as compared to Rs25.492 billion in 2023-24, showing an increase of Rs19.508 billion.
The FBR has suffered a massive revenue loss of Rs985.594 billion in 2024-25 as compared to Rs675 billion in 2023-24 due to sales tax exemptions available under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act. The loss on account of sales tax exemption (import and domestic stage) has been increased by nearly Rs985 billion.
The total revenue loss from the zero-rating facility granted to various sectors under the Fifth Schedule of the Sales Tax Act, 1990, amounted to Rs683.429 billion during the period under review against Rs206.053 billion in 2023-24, reflecting an increase of Rs477.376 billion.
The FBR has not specified any revenue loss to the exemptions within the federal excise regime, reflecting no loss occurred on this account. The cost of income tax exemptions was Rs800.8 billion in 2024-25 against Rs476.960 billion in 2023-24, reflecting an increase of Rs323.84 billion.
The cost of exemptions in respect of customs duty has been calculated at Rs785.9 billion in 2024-25 as compared to Rs543.521 billion in 2023-24, reflecting an increase of Rs242.379 billion.
The FBR has suffered revenue loss of Rs61 billion in 2024-25 against Rs44.107 billion in 2023-24 on account of tariff concessions and exemptions available under Free Trade Agreements (FTAs) and the Preferential Trade Agreements (PTAs). The revenue loss has increased by Rs17 billion.
The exemption of customs duty on the items by the automobile sector, exploration and production (E&P) companies, general concessions and the CPEC caused a loss of Rs133.236 billion in 2024-25 against Rs146.598 billion in 2023-24, showing a decrease of Rs13.362 billion.
