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Industry specific incentives.

Industry Specific Incentives

Government has announced specific incentives for the industry. Sector-wise incentives have been given below:

Key Industries

Plant and machinery not manufactured locally and imported for establishment of |key industries' namely biotechnology, electronics, fertilizer, fibre optic and solar energy will be exempt from the whole of the custom duty and sales tax thereon. In addition, four year tax holiday would also be available throughout Pakistan to these industries.


Electronics industry is becoming more and more important for broadening the base for industrialization in the country. Considering the fact that the country was not making any headway in this sector, the Government has allowed the following incentives:

i) Profits and gains derived by an assesses, from an industrial undertaking engaged in the manufacture of electronic equipments or components thereof which is set up in the North-West Frontier Province or in the Islamabad Capital Territory are exempt from income tax for a period of 5 years from the date of commencement of commercial production. ii) Profits and gains derived by an assesses from the key industrial undertakings, set up between 1-7-1988 and 3-.6. 1993, are exempt for a period of 4 years. These industries include:

a) Computer and Soft-Wares.

b) Electronic Equipments.

c) Solar Energy Equipments. iii) The following goods, when produced or manufactured in Pakistan, have been exempted from the levy of sales tax:

a) Magnets based on agglomerated


b) Digital switching system.

c) Parts of television reception ap

apparatus and inverters upto 10


d) Potentiometers and printed circuits.

e) Solar cells, travelling wave tubes,

image intensification tubes, picture

tubes, cathode ray tubes including

LED and LCD, integrated circuits,

custom built chips, diodes,

transistors, tuners and semi-conductor


f) Image projectors.

g) Laser equipments.

h) Mathematical calculating

instruments used by students.

i) Digital multimeters.

h) Automatic control equipment and

oscilloscopes. iv) Plant and machinery, raw materials and components when imported for installing the electronic industry and manufacturing electronic equipments and systems are exempted (under SRO 510(i)/89 and SRO 515(i)89, both dated 3rd June, 1989) from customs duty and sales tax. v) Computer Software:

Computer Software has been made importable free of duty.


Pakistan is facing a shortage of fertilizer. Due to a gradual increase in the offtake of fertilizer in the recent past, the short-fall has further been increased. To cope with the problem, the Government has decided to further encourage the local manufacture of fertilizers in the country. To achieve the objective, following concessions and facilities have been allowed to new projects and existing units envisaging expansion:

i) Assured supply of gas at existing prices for the purpose of feed-stock for a period of 10 years from the date of operation of plants. ii) Duty-free import of machinery not manufactured in the country. This exemption will include Iqra and Import surcharge. iii) Duty-free of phosphate rock. This exemption will include Iqra and Import surcharge. iv) In the unlikely event of imposition of price control, the ex-factory price will be so fixed that a minimum return of 20% on equity after tax at 90% capacity utilization is assured. v) The entrepreneurs would be allowed to import second-hand machinery, if they so desire. vi) The gas used in the reforming furnace for heating will be treated as feed stock. vii) Assured supply of gas used as fuel at least for 9 months in a year. viii) All the fertilizer producers domestic and foreign, public and private will be treated equally. ix) It would be the responsibility of the DFIs to check the economic and financial viability of the projects before providing finance. x) Expansion would be treated as new plants and be entitled to the same concessions as allowed to new plants.

Apart from Nitrogenous Fertilizer (Urea), manufacture of DAP/Phosphatic fertilizer was also lagging behind. The project proposals approved in the past were not making any progress towards implementation for want of protection against dumping. The government has decided to provide necessary protection and safeguards to make them compete the imported fertilizer. therefore, following pricing measures for Phosphatic Fertilizer have been taken:

i) In order to avoid any ambiguity, import duties, if any, will be so adjusted that the C&F price plus duty plus the costs of bagging (but excluding other incidentals) does not fall below the equivalent of US$ 250 per ton. ii) Iqra and import surcharges on sulphur specifically used for the manufacture of fertilizers are waived. iii) If any change is made in government levies on the basic raw materials (import duties, sales tax, surcharges, etc.) or any levy imposed on local production of DAP (such as excise duty, sales tax, surcharges, etc.) there would be corresponding change in the floor price of US$ 250 per ton. iv) In line with the current policy, the projects would enjoy three to eight years tax holiday from the date of commercial production, depending upon the areas where such projects are set up.


So far the scope of custom duty exemption on the import of plant and machinery for the manufacturer of pharmaceutical raw material in the country was restricted to such units which make use of the local flora and fauna. It has now been decided to extend the scope of this concession to plants and machinery used for basic manufacture of pharmaceuticals.


Customs duty exemption on mining machinery and equipment was withdrawn earlier. The Government has restored this concession on such mining equipments and machinery which is not manufactured in the country.

Dairy Farming

Dairy machinery and equipment not manufactured locally is exempt from whole of custom duty and sales tax.

Machinery for livestock farms/dairy items and feed mills has been exempted from payment of custom duty. Drip Irrigation system, water sprinklers, hydraulic ram pump, precision land levelling equipment and aerial rope ways and skyline cranes has also been exempted.


Plant and machinery imported for the manufacture of cement, including portland cement, is exempt from whole of custom duty, if not manufactured locally.


a) Machinery and equipments not manufactured locally is exempt from whole of custom duty and sales tax.

b) Raw materials and components used in the manufacture of the capital goods and machinery as specified below and notified under SRO No. 600(i)/83 and 601(i)/83, dated 11th June, 1983 for initial installation, balancing modernizing or replacement are exempted from whole of the custom duty thereon.

Description of Capital Goods and Machinery

- Ball roller and taper bearings. - Barrage gates. - Centrifugal and turbine pumps. - Cement plants. - Dies and moulds. - Diesel engines. - Diesel generating sets. - Electric meters. - Electric motors. - Electric transformers. - Electricity poles - Gas meters. - Gas appliances for industrial use. - Industrial chains. - Industrial sewing machines. - Insulators - Jute Mill machinery. - L.P.G. tanks of a capacity of 30 tons

and above. - Machine tools. - Mounted tripod for machine guns. - Office machines. - Parts of automotive vehicles. - Passenger lifts. - Petrochemical plant and machinery

for oil and gas drilling, refining and

distribution. - Petroleum (gasoline) dispensing

pumps. - Road rollers. - Sugar plants. - Switch gears for industrial use. - Tea driers. - Textile machinery excluding cone

winding machines. - Transmission towards. - Water meters. - Welding generators. - Air-conditioning plants including

chilling plants and humidification

plants of more than 10 horse power. - Band saw blades. - Electric accumulators and separator

plates. - Telecommunication equipments. - Electrical capacitors. - Wire and cable manufacturing

industry. - Bolts, nuts and screws manufacturing

industry. - Industrial units manufacturing tubing

for transformers. - Wire rope manufacturing industry. - Welding Electrodes manufacturing

industry. - Aluminum rod manufacturing industry. - Wire rod manufacturing industry. - Solder wire manufacturing industry. - Steel tubes and pipe manufacturing

industry. - Circuit breakers manufacturing

industry. - Compressed or liquified gas cylinders

manufacturing industry. - Grinding wheels manufacturing

industry. - Any other machinery and equipment

required by exempted sectors as

specified by the Central Board of

Revenue. - Parts of the above-mentioned capital

goods and machinery when

specifically allowed by the Central

Board of Revenue.
COPYRIGHT 1991 Economic and Industrial Publications
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Publication:Economic Review
Date:Nov 1, 1991
Previous Article:Foreign investment in Pakistan.
Next Article:Sugarcane availability and prospects - 1991-1992.

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