The Federal Board of Revenue (FBR) has committed to reconsidering the removal of incentives for the manufacturing of hybrid electric vehicles and the proposed penalties on the telecom sector for not blocking SIM cards of identified non-filers. This assurance was provided by the FBR chairman during a Senate Standing Committee on Finance meeting, chaired by Senator Saleem Mandviwalla, on Thursday to review the Finance Bill, 2024.
Hybrid Electric Vehicles Investment Concerns
Indus Motor’s CEO informed the committee that the auto sector had invested $100-150 million in manufacturing hybrid and electric vehicles under the 2021-2026 auto policy. However, the government has abruptly withdrawn incentives previously granted under Article 73 of Schedule 8th, just six months after this investment. The committee acknowledged these concerns, with Faisal Vawda emphasizing the potential damage to investments and calling for accountability.
Telecom Sector Penalties
The telecom sector expressed its inability to block SIM cards of non-filers, as proposed in the Finance Bill 2024, which suggests a hefty penalty of Rs100-200 million for non-compliance. Industry representatives highlighted the sector’s significant economic contributions, including $20 billion in investments and 5% of GDP. They also noted that two companies have already exited the market, leaving only three operators.
Committee Deliberations
The committee, including senators Sherry Rehman, Farooq Hamid Naek, Mohsin Aziz, Faisal Vawda, and Manzoor Ahmed Kakar, along with FBR officials and industry stakeholders, engaged in extensive discussions over two sessions lasting seven hours.
Federal Excise Provisions
Key discussions included federal excise provisions in the Finance Bill. The committee considered penalizing retailers selling cigarette packs without proper tax stamps and debated the 18% sales tax on nicotine pouches and duties on electronic cigarette imports. Amendments were also proposed to abolish the 20% federal excise duty on packaged juices, but the committee retained the existing tax structure, citing continuity with past legislation.
Property Sector and Inflation Rates
Taxation issues in the property sector and anticipated inflation rates for the upcoming financial year were also discussed. Senator Mandviwalla raised concerns about the impact of tax levies on consumers, while the FBR chairman highlighted current tax rates across various sectors.
Support for Electric and Hybrid Vehicles
Senator Faisal Vawda advocated for policies supporting the electric and hybrid vehicle sector to maintain investor confidence. FBR officials explained taxation differences between imported and domestically manufactured vehicles, noting the Ministry of Industry’s jurisdiction over these matters.
Stakeholder Presentations
The second session featured presentations from the telecommunications and steel mill industries. The telecom sector raised issues regarding advance tax collections and sales taxes on mobile handsets, while steel mill industry concerns were referred to an anomaly committee for further review.
Inflation Projections and Revenue Growth
The FBR chairman expressed uncertainty about inflation projections but remained confident in revenue growth. Senator Mandviwalla voiced concerns that increased taxes might lead to higher inflation rates.
Conclusion and Recommendations
The committee recommended continued engagement with stakeholders to resolve outstanding issues and ensure fair taxation policies that support economic stability and growth.
