Mohsin Siddiqui (Chief Reporter)
The Private Power & Infrastructure Board (PPIB) has urged the Federal Board of Revenue (FBR) to amend the Sales Tax Act, 1990, and the Income Tax Ordinance, 2001. These amendments are crucial for enabling the timely development of planned fast-track solar PV projects by Arab countries.
According to PPIB, the Government of Pakistan (GOP) aims to achieve energy security, affordable electricity, environmental protection, and sustainable development. To fulfill these objectives, the GOP plans to deploy solar power on a fast-track basis. This move aims to complement or substitute the expensive imported fossil fuels currently used for power generation.
Developing solar power infrastructure not only ensures savings in foreign reserves spent on imported fossil fuels but also facilitates the provision of affordable electricity to consumers. Additionally, it paves the way for a sustainable power sector in the long run.
In October 18, 2022, the Federal Cabinet approved the Framework Guidelines for Fast-Track Solar PV Initiatives 2022. Pursuant to these guidelines, large-scale solar PV projects will be developed under the Independent Power Producer (IPP) mode through competitive bidding or under Government-to-Government (G2G) frameworks.
The GOP has already received interest from governments of countries like Saudi Arabia, the United Arab Emirates, and Kuwait for developing renewable energy projects in Pakistan under the G2G mode.
To incentivize IPPs, the Framework Guidelines offer fiscal and financial benefits. These include exemptions from import-related duties and taxes for machinery, equipment, and materials required for solar PV projects. Additionally, profits from electricity sale by IPPs will be subject to a reduced income tax rate of 15% for the project’s term.
Shah Jahan Mirza, Managing Director of PPIB, highlighted in his letter to the Chairman of FBR that recent tax amendments have withdrawn sales tax exemptions on imports for Alternative and Renewable Energy (ARE) projects. Furthermore, income tax exemptions have been eliminated, subjecting these projects to the standard corporate income tax rate of 29%.
PPIB emphasizes that to enable IPPs to benefit from exemptions and reduced tax rates as per the Framework Guidelines, amendments to relevant legislation are necessary.
In conclusion, PPIB urges FBR to take necessary action to amend the Sales Tax Act, 1990, and the Income Tax Ordinance, 2001, to facilitate the timely development of planned fast-track solar PV projects.
