FBR Stops Collecting Sales Tax on Chinese Imports At Sost Border

The Federal Board of Revenue (FBR) has stopped the collection of sales tax and income tax on Chinese imports from Sost Border. This would result in an estimated revenue loss of over Rs. 3 billion per annum from imports from China. The Collectorate of Customs (Gilgit Baltistan) has written a letter to FBR on a restraining order on the collection of sales tax and income tax on the import stage by the Chief Court – Gilgit Baltistan. Collector of Customs informed FBR, Chief Court – Gilgit Baltistan on July 20, 2024, in writ petition number 201 of 2024, has passed an ex-parte restraining order at the admission stage without issuing notices to the FBR and other respondents: “to not collect sales tax, income tax and additional sales tax from importers and exporters at Sost Dry Port, declaring that Gilgit Baltistan is exempt from these taxes. Sales tax and income tax at the import stage at Sost Dry Port were collected last year equal to Rs 2.798 billion and Rs 0.979 billion respectively, according to the Collector of Customs. The Sales Tax Act 1990 and Income Tax Ordinance 2001 have not been extended to Gilgit Baltistan as per Gilgit-Baltistan Constitution Order 2018 and its predecessor constitutional orders. However, under Constitution Order 2018, the Prime Minister is empowered to do so. The issue has a long historical background since 1981, in fact, Income Tax Ordinance 2001 was extended to Gilgit Baltistan in 2012 and later withdrawn as a result of discussions and decisions in FBR and Prime Minister’s office. The matter involves important constitutional issues, if the Board reaches to conclusion that the subject restraining order needs to be contested in the court then it is proposed that the Board may hire a constitutional lawyer from Islamabad, as no suitable lawyer is available here. In such a situation, the office of the Attorney General of Pakistan may also be engaged if deemed necessary, Collector of Customs added.