FBR Strongly Opposes KP Govt’s 2% Development Cess on Export Consignments

The Federal Board of Revenue (FBR) has strongly opposed the imposition of a 2 percent Infrastructure Development Cess (IDC) by the Government of Khyber Pakhtunkhwa on export consignments through air, road, or rail vide Public Notice Dated 22 August 2024. According to FBR, the Federating Units (Provinces) are competent to levy cess on goods/services produced, brought into or taken out of the province. Provincial governments have already levied Infrastructure Development Cess on imports and are collecting the same through Customs Computerized System for the past decade. The tax regulator doesn’t like how provinces under the Constitution appear to have the power to levy an Infrastructure Development Cess on transportation, carriage, or movement of goods for imports to or exports from the province. However, in order to encourage exporters and to increase exports, duties/taxes are usually not levied on exports as it might have an adverse effect on exports and the flow of foreign exchange into the country. The province of Khyber Pakhtunkhwa borders with Afghanistan and apart from exports to other countries via sea or air, substantial exports are made to Afghanistan from different border stations located in KP. FBR said levying a 2 percent Infrastructure Development Cess by the Khyber Pakhtunkhwa government might negatively impact exports from the province of Khyber Pakhtunkhwa. Pakistan Customs to-date is not collecting this Cess rather banks are collecting it on behalf of the Provincial Government, FBR added.