AJK CBR seeks withdrawal of amended SRO 96 (I) 2021

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Altaf Hamid Rao.

MIRPUR (AJK),   (Parliament Times) :    Fearing drastic negative repercussions of a recently-promulgated amended SRO 96 (I) 2021 of 26th of January this year by the Federal Board of Revenue, the Central Board of Revenue (CBR) of Azad Jammu Kashmir government has requested to the FBR for immediate withdrawal of the aforesiad SRO for the survival of the Industrial-sector in the tax-free under-developing territory of Azad Jammu Kashmir.

In his recent letter addressed to the Chairman of the Federal Board of Revenue of Govt. of Pakistan, Chairman Central Board of Revenue of AJK Government Farhat Ali Mir has described the SRO.96(I)2021 dated 26th January, 2021 issued from Federal Board of Revenue containing amendment in Sales Tax Rules of 2006 by the FBR as resorting to a unique and discriminatory treatment for the tax~free territory of Azad Jammu and Kashmir.

Following is the text of the letter from the AJK CBR Chairman Farhat Ali Mir, addressed to Muhammad Javed Ghani, Chairman, Federal Board of Revenue, Govt. of Pakistan :-

“I hope this letter would find you in best of your health. First of all, I take this opportunity to express our sincere gratitude on approval of Federal Board of Revenue to establish Dry Port in Azad and Kashmir at Mirpur. This gracious dispensation for AJK by Government of Pakistan will surely boost up industrial and overall socio-economic development in the area which is indispensable in our efforts to provide employment opportunities and ensure economic uplift of the people of Azad Jammu and Kashmir.

2. Let met also acknowledge your esteemed consideration for timely resolution and settlement of different tax issues of the AJ&K. Your kindness encouraged me to draw your immediate attention towards SRO.96(I)2021 dated 26th January, 2021 issued from Federal Board of Revenue, Through this amendment in Sales Tax Rules of 2006, FBR has introduced a unique and discriminatory treatment for the territory of Azad Jammu and Kashmir. The method authorizes its field formations to install check posts and to mobilize search teams all along entry points of Azad Kashmir for demanding documents including sales tax invoices from industrials and traders while they transport goods and supplies originated from the territories of Azad Jammu and Kashmir.

 

3. The aforementioned innovative and harsh treatment brought first time in the history by FBR has created unrest among industrialists and business community of Azad Jammu and Kashmir. They felt discouraged and marginalized to face such discriminatory treatment by Federal Board of Revenue. This drive will surely leads to closure of industrial activities due to unhealthy and discriminatory hindrances in smooth and timely supplies of their goods from AJK. This would also entail a loss of State revenue and drainage of major source of employment in AJ&K. AJ&K Chamber of Commerce & Industry has also shown grave concern over issuance of SRO 96(I)2021 dated 26th January, 2021 as its implementation would be detrimental for AJ&K Industry. The closure of ongoing limited number of industrial units will not only discourage prospective investment opportunities and confidence in the Government of AJK but also further increase unemployment in the area.

 

4. It is imperative to highlight that territory of Azad Jammu and Kashmir comprises of mostly hilly, hard and low-approached area where the infrastructure to start up any type of industrial or business activity is rare and limited. Our economy is dependent upon facilitative environment which should generously continue as extended by the Government of Pakistan. A major chunk of AJK’s revenue is being realized from the business and trade activities from District Mirpur wherein industrial setups of different types are established and operative. For attracting investments and boosting up business, economic and industrial activities, the Government of AJ&K adopted a policy vide Notification No.FD/Tax/1145/95 dated 08.02.1995, to provide 05 year tax exemption to newly established industrial units in AJK. This only incentive attracted industrial activities in the area on very limited scale. Whereas, taxation regime in AJK mostly resembles with FBR, Government of Pakistan. All fiscal laws of Pakistan practiced by FBR in particular Income tax, General Sales Tax (Goods) and Federal Excise Duty are adapted and implemented in the AJ&K territory with similar methodology under Azad Jammu and Kashmir Central Board of Revenue which has been established on the pattern of FBR Act, 2007. At present, a few industrial groups of Pakistan established their units in AJ&K and thereby contributing significantly towards employment generation and economic growth. These industrial units operating in AJ&K are importing and purchasing their raw materials from Pakistan and after production, such industrial units supply their products to the markets in Pakistan due to limited market scope and utilization demand in AJ&K.

 

5. It is pertinent to mention here that AJ&K Industrial Zone is also receiving separate tax treatment which is already surviving with limited industrial and economic activities. The Government of Pakistan has extended special tax incentives and tax facilitations for promotion of industrial and economic activities in erstwhile FATA and also to KPK and Baluchistan. Thus arrangements uniquely enacted by FBR through Notification SRO 96(I)2021 dated 26th January, 2021 for AJ&K’s Industrial Zone could not be imagined without inviting input from Government of AJ&K. AJK is not only resource deficient but having sensitive and special status in the country. Such peculiar and discriminatory treatment may negatively impact economic activities in Azad Jammu and Kashmir.

 

6. Foregoing submissions in view, it is humbly requested that SRO 96(I)/2021 dated 26th
January, 2021 may please immediately be withdrawn. Alternatively applicability of subject cited Rules 69-C and 69-F for AJK may be kept in abeyance till amicable resolution of issue. For this, I will suggest to call a formal meeting with all relevant stakeholders including FBR, AJ&K Central Board of Revenue, Government, AJ&K business community (traders, industrialists) and representatives of Chamber of Commerce & Industry”.