PALSP Calls for End to Misused Tax Exemptions in Tribal Areas

The Pakistan Association of Large Steel Producers (PALSP) has called on the government to revoke the unjust tax exemptions granted to industrial units in the former tribal areas, arguing these are being widely misused. According to PALSP, products manufactured in these regions are being sold in the tariff areas of Pakistan, undermining fair competition.

In a letter to the prime minister, PALSP acknowledged some recent government initiatives to support local industries. However, it expressed alarm over the agenda of a meeting on the taxation regime of NMDs held on December 26, 2024. The meeting's focus on continuing these exemptions has caused significant concern within the steel and other industries.

PALSP criticized the prolonged exemptions, stating they create a perception of "one state, two rules." The association argued that misuse of these tax breaks has led to the closure of numerous steel units in Hattar Estate, Islamabad, and Gadoon Industrial Estate, adversely impacting local tax-paying industries.

The association strongly opposed any plans to extend these discriminatory exemptions, which it claims have damaged the steel industry. Foreign investors, such as Century Steel—a key Chinese investment—have threatened to withdraw due to the deteriorating industry conditions.

The tax exemptions, initially intended to support FATA/PATA residents, have allegedly been exploited. Goods produced in non-taxed areas are sold in taxed regions without paying sales tax, affecting various sectors like ghee, plastics, and tea. Over 60% of the steel industry has been devastated, with over 50 units shutting down across cities like Islamabad, Karachi, and Lahore. Major steel producers in KPK have ceased operations, resulting in significant economic losses.

While the FY 2024-25 budget extended these exemptions for a year with safeguards like pay orders for raw material imports, FATA/PATA industries challenged this in the Peshawar High Court. The court ruled in favor of the industries, permitting post-dated cheques instead of pay orders, further aggravating the issue.

PALSP accused influential figures with vested interests in FATA/PATA of misleading the government to sustain these exemptions. The association urged the government to implement a uniform tax system to ensure fairness across all regions, warning that continuing these exemptions will further harm key industries like steel, oil, plastics, and tea.