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Incentives for rural industrial development.

Incentives for Rural Industrial Development

The Government of Pakistan have announced altogether a new package for rural industrialization with a view to make it more comprehensive and broad-based. The main features of the new package are as under:-

Definition of Rural Areas

a) Rural Areas in the context of Rural

Industrial Development Incentives

shall mean all Rural Areas excluding:-

(a) Major Industrial Estates of Hub,

Nooriabad, Chunnian, Hattar and

Gadoon and areas upto 10 kilometers

outside their limits. b) i) The municipal limits of Karachi

and 40 kilometers areas around these

limits.

ii) The Municipal/Cantonment limits

of Lahore and 30 kilometers around

these limits.

iii) The existing limits of Municipal

Corporations and their Cantonment

Boards and 10 kilometers areas

around these limits.

iv) Areas falling within the limits of all

Municipal Committees and Cantonment

Boards and Islamabad Capital

Territory.

In the earlier policy

designed for Rural

Areas, Industries producing

fertilizer, cement,

automobiles, oil

refineries and sugar

were not eligible for

fiscal concessions

announced under this

package. This restriction

has been lifted in

the new policy. Details

of incentives and concessions

approved by

the Government are as

under:- * Five years income tax

holiday will be available

to all industries set

up in Rural Areas provided such industries

are set up between 1st December,

1990 to 30th June, 1995.

These concessions will be applicable

only to income generated from that

particularly industry. * Imported machinery for Rural Industries

would be totally exempted from

the payment of custom duty, sales tax

and import surcharge provided such

machinery is not manufactured locally.

Import licence fee has also

been reduced from 6 per cent to 2 per

cent for all such industries established

in the rural areas. * Government institutions will acquire

necessary technology from abroad

for its transmission to the rural entrepreneurs

on nominal rates. These

institutions will provide required technical

assistance and marketing expertise

for rural industrial projects. * No question would be asked about

the source of investment, provided

L.Cs are established or contracts for

local plant and machinery are signed

by 30-6-1992. Debt Equity Ratio for

all industrial units has been fixed at

70:30 instead of 60:40, in case of

projects based on imported machinery.

For projects involving local

machinery the Debt Equity Ratio of

80:20 has been fixed. * Creation of power generation by the

entrepreneurs of such industries individually

or collectively will be encouraged

and in case where there is excess

of electricity after meeting own

demands WAPDA will purchase the

same.

Necessary Notification/SRO to implement the Rural Industrial Development Incentives in the light of the above decision of the Government have been issued by the Ministry of Finance and Economic Affairs.

S.R.O. No. 12 83(1)/90: In exercise of the powers conferred by sub-section (2) of section 14 of the Income Tax Ordinance, 1979 (XXXI of 1979), the Federal Government is pleased to direct that the following further amendments shall be made in the Second Schedule to the laid Ordinance, namely:- In the aforesaid Schedule:- (1) in Part-I after clause (118B), the following new clauses shall be inserted, namely:-"(118C)(I) Profits and gains derived by an assessee from an industrial undertaking set up between the First day of December, 1990, and the thirtieth day of June, 1995, both days inclusive for a period of eight years beginning with the month in which the undertaking is set up or commercial production is commenced, whichever is the later. (2) The exemption under this clause shall apply to an industrial undertaking which fulfils the following conditions, namely:- a) that it is set up

in the Province of Balochistan (excluding

Hub Chowki area), the North

West Frontier Province, the Federally

Administered Tribal Areas, the Northern

Areas, Azad Kashmir, the divisions

of Dera Ghazi Khan and Bahawalpur

in the provide of Punjab or

the divisions of Sukkur and Larkana in

the Province of Sindh. b) that it is owned and managed by a

company formed exclusively for operating

the said industrial undertaking

and registered under the Companies

Ordinance, 1984 (XLVII of 1984), and

having its registered office in Pakistan. c) that it is not formed by the splitting up

or the reconstruction or reconstitution

of business already in existence or by

transfer to a new business of any

machinery or plant used in a business

which was being carried on in Pakistan

stan at anytime before the commencement

of the new business. and d) that it is engaged in the manufacture

of goods or materials or the subjection

of goods or materials to a manufacturing

process, or mining (excluding

petroleum and gas) or extraction of

timber.

(118D) (I) Profits and gains derived by

an assessee from an industrial undertaking

set up between the first day of

December, 1990, and the thirtieth day

of June, 1995, both days inclusive, for

a period of five years beginning with

the month in which the undertaking is

set up or commercial production is

commenced, whichever is the later. 2) The exemption under this clause shall

apply to an industrial undertaking

which fulfils the following conditions,

namely:- a) that it is set up in an area, not covered

by clause (118C), outside the limits of

any municipal corporation or municipal

committee or any cantonment

board and Islamabad Capital Territory

in no case within the following

areas namely:- i) industrial estates of Hub, Nooriabad,

Chunian. Hatter and Gadoon and

areas up to ten kilometers outside the

limits of such estates; ii) up to forty kilometers from the municipal

or cantonment limits of Karachi; iii) up to thirty kilometers from the municipal

or cantonment limits of Lahore; and iv) up to ten kilometers from the existing

limits of municipal corporations or cantonment

boards. b) that it is owned and managed by a

company formed exclusively for operating

the said industrial undertaking

and registered under the Companies

Ordinance, 1984 (XLVII of 1984), and

having its registered office in Pakistan; c) that it is not formed by the splitting up

or the reconstruction or reconstitution

of business already in existence or by

transfer to a new business of any

machinery or plant used in a business

which was being carried on in Pakistan

at any time before the commencement

of the new business; and d) that it is an undertaking engaged in

the manufacture of goods or materials,

or the subjection of goods or

materials to a manufacturing process,

or mining (excluding petroleum and

gas) or extraction of timber.

(118E) (1) Profits and gains derived

by an assessee from an industrial

undertaking set up anywhere in Pakistan,

not covered by clause (118C) or

clause (118D), between the first day

of December, 1990, and the thirtieth

day of June, 1995, both days inclusive,

for a period of three years beginning

with the month in which the

undertaking is set up or commercial

production is commenced, whichever

is the later. 2) The exemption under this clause shall

apply to an industrial undertaking

which fulfils the following conditions,

namely:- a) that it is owned and managed by a

company formed exclusively for operating

the said industrial undertaking

and registered under the Companies

Ordinance, 1984 (XLVII of 1984), and

having its registered in Pakistan. b) that it is not formed by the splitting up

or the reconstruction or reconstitution

of business already in existence or by

transfer to a new business of any

machinery or plant used in a business

which was being carried on in Pakistan

at any time before the commencement

of the new business; and c) that it is an undertaking engaged in

the manufacture of goods or materials,

or the subjection of goods or

materials, to a manufacturing process,

or mining (excluding petroleum and

gas) or extraction of timber.

(2) in Part-IV, after clause (7), the

following new clause shall be added,

namely:-

(8) The provisions of section 13,

Chapter XI or Chapter XII shall not

apply in respect of any amount invested

in the purchase of shares of a

company owning and managing an

industrial undertaking the profits and

gains from which are exempted under

clause (118C) or clause (118D) or

clause (118E) or clause (118F) of Part

I of this Schedule:

"Provided that the letter of credit for

the import of plant and machinery

required for the setting up of the industrial

undertaking has been opened

before the thirtieth day of June, 1992,

and in the case of locally manufactured

plant and machinery, a firm order

for its purchase has been placed before

the said day."

Customs

S.R.O. No. 1284(I)/90:- In exercise of

the powers conferred by section 19 of

the Customs Act, 1969 (IV of 1969)

sub-section (2) of section 2 of the

Finance Ordinance, 1982 (XII of 1982)

and section 13 of the Sales Tax

(Amendment) Act, 1990 (VII of 1990),

the Federal Government is pleased to

exempt such plant and machinery as

is not manufactured locally and is

imported during the period commencing

on the 1st December, 1990, and

ending on the 30th June, 1985, for

setting up new units and for expansion

or balancing, modernization and

replacement of existing units:- a) In areas other than mentioned in Table-I

from whole of the custom duty, surcharge

and sales tax leviable or

chargeable thereon under the First

Schedule to the Customs Act, 1969,

or, as the case may be, the Finance

Ordinance, 1982, or the Sales Tax

(Amendment) Act, 1990; and

Table : Table - I

S. No. Areas 1. The Municipal or Cantonment Board

limits of Karachi and 40 kilometers

area around these limits. 2. The Municipal or Cantonment Board

limits of Lahore and 30 kilometers

around these limits. 3. The existing limits of Municipal Corporations,

Municipal Committees and

their Cantonment Boards and 10 kilometers

areas around Municipal Corporations

and their Cantonment

Boards, in Provinces of Sindh and

Punjab excluding Bahawalpur, D.G.

Khan, Sukkur and Larkana Divisions. 4. Areas falling within the limits of Islamabad,

Capital Territory and Hub

Tehsil in the Province of Balochistan. b) in the areas specified in Table-II from

so much of the customs duty leviable

thereon under the First Schedule to

the Customs Act, 1969, as is specified

in column 3 of the said Table and

whole of the sales tax chargeable

thereon under the Sales Tax (Amendment)

Act, 1990.

subject to the conditions set out below,

namely:- [Tabular Data Ommitted]

i) machinery operated by power

of any description, such as is used in

any industrial process including mining

and extraction of timber.

ii) apparatus and appliances, including

metering and testing apparatus

and appliances specially adapted

for use in conjunction with machinery

specified in item (i) above.

iii) power generating plant for

operating item (i) above.

iv) mechanical and electrical control

and transmission gear adapted

for use in item (i) above; and

v) component parts of machinery

as specified in items (i), (ii), (iii) and

(iv) above, identifiable as for use in or

with such machinery. 2) The importer shall, at the time of import

of machinery, make a written

declaration on the bill of entry to the

effect that the machinery has been

imported for a project located in areas

other than those specified in Table-I

or for the areas specified in Table-II,

as the case, may be. 3) The importer shall furnish an indemnity

bond in the Form set out below to

the extent of customs duty, surcharge

and sales tax exempted under this

notification. The said indemnity bond

shall be discharged subsequently on

the production of a certificate from the

Assistant Collector, Customs and

Central Excise, to the effect that the

plant and machinery imported for

setting up new units or expansion or

balancing, modernization and replacement

of existing units located in the

areas enjoying benefit of concession

under this notification, have been duly

installed in the aforesaid areas. 4) The certificate of installation referred

to condition (3) shall be submitted

to the Collector of Customs not later

than one year from the date of importation

of the plant and machinery to

which it relates. 5) The plant and machinery released

under this notification shall not, within

a period of eight years from its importation,

be used in any area which is

not eligible for the same concession.

In case this condition is violated the

amount of customs duty, surcharge

and sales tax exempted under this

notification and penalties that may be

imposed in this behalf shall be recovered

under section 202 of the Customs

Act, 1969 (IV of 1969).
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Title Annotation:rural industrialization in Pakistan
Author:Jahangir, G.A.
Publication:Economic Review
Date:Jun 1, 1991
Words:2070
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