Tax Exemption Regime in Gilgit-Baltistan Carefully Designed, Says FBR
The system includes adequate safeguards to protect national revenues and the interests of traders across the country
Islamabad (Web News)
The Federal Board of Revenue (FBR) has assured traders and the business community across Pakistan that the tax exemption regime in Gilgit-Baltistan has been designed with utmost care and is being closely monitored. The system will not, in any way, harm fair competition or legitimate commercial interests in other parts of the country. It includes appropriate safeguards to protect national revenues as well as the interests of traders nationwide.
In a statement, the FBR said it has taken note of the concerns expressed by traders, stakeholders, and trade organizations regarding the proposed mechanism of not levying federal taxes on goods imported exclusively for local consumption in Gilgit-Baltistan. The FBR clarified that a comprehensive and robust system has been put in place to prevent misuse of tax-exempt goods and to safeguard the interests of traders and the business community in the rest of the country.
According to the statement, Gilgit-Baltistan has a special status, and certain federal tax laws — including the Sales Tax Act, 1990; the Income Tax Ordinance, 2001; and the Federal Excise Act, 2005 — have not been extended to the region. In view of this special status, and following representations by the Gilgit-Baltistan government and local traders, the federal government agreed that no taxes under the Sales Tax Act, 1990, the Income Tax Ordinance, 2001, and the Federal Excise Act, 2005 will be levied at the import stage on goods imported through the Sost Dry Port exclusively for use within Gilgit-Baltistan.
However, to ensure fiscal discipline and prevent potential misuse, a strict annual cap of Rs 4 billion has been imposed on goods imported under this facility for Gilgit-Baltistan.
The statement further said that to ensure transparent and effective implementation of this policy, protective measures have been introduced under which the Gilgit-Baltistan government will allocate a separate quota to each trader for tax-free goods meant for local consumption. Collectively, these quotas will not exceed the annual limit of Rs 4 billion.
Under the FBR, Pakistan Customs has developed a special module in the WeBOC system that will enable automated registration, debit, and real-time monitoring of these quotas. Once a trader’s allocated quota is exhausted, the system will automatically block further tax-free imports and applicable taxes will be collected in accordance with the law.
The Gilgit-Baltistan government has formally assured that such goods will be strictly used only within Gilgit-Baltistan. In addition, Pakistan Customs has devised an enforcement mechanism to prevent the movement of tax-exempt goods from Gilgit-Baltistan to other parts of the country. Under the agreement with the Gilgit-Baltistan government and traders, any violation — such as the transfer of tax-free goods outside Gilgit-Baltistan — will invite strict action. This may include cancellation of traders’ quotas, confiscation of goods, and, if necessary, a reduction in the overall exemption limit.
The statement noted that since the Customs Act is applicable to Gilgit-Baltistan, all duties imposed under this Act — including customs duty, regulatory duty, additional customs duty, etc. — will be collected on all imports through the Sost Customs Station, regardless of their intended use.
The FBR reiterated that all these measures together provide a strong, technology-driven, and enforceable framework aimed at preventing any leakage or misuse of tax-exempt goods. Traders and the business community across the country are assured that this exemption regime has been carefully designed, is being closely monitored, and will not harm fair competition or legitimate commercial interests in other parts of Pakistan.
The mechanism is a targeted facilitation introduced solely to serve the people and economy of Gilgit-Baltistan, is fully aligned with its constitutional status, and includes adequate safeguards to protect national revenues and the interests of traders across the country.