An eight-member investor delegation from the EPZ’s – Export Processing Zones met Prime Minister Imran Khan on Tuesday 11 January 2022; in the presence of Finance Minister Shaukat Tarin and FBR Chairman to discuss the illogical imposition of GST in the EPZs, from which 100% goods are exported.
The delegation explained the implications of increased working capital needs with no benefit to the Government of Pakistan where 100% would be reimbursed. It was further reiterated that the confidence of foreign/local investors would be affected by such a policy change where contracts between the government and investors were in place to maintain incentives until the completion of the 30-year deal. In addition, incentives including GST/VAT exemptions in free zones in the region such as Bangladesh and Sri Lanka were shared and it was explained that Pakistan would not be competitive due to the withdrawal of the GST exemption.
The Treasury Secretary and FBR Chair shared shocking numbers of the EPZ’s import versus export figures which were challenged by the investors because the data they referenced was inconsistent with EPZA (Export Processing Zones Authority – an autonomous body working under the federal government umbrella). The investors shared figures obtained from EPZA, where exports were $908 million versus imports of $428 million (2020-2021 period) and tax/service charges paid were $13.6 million for the same period. The FBR chairman assured investors that he would investigate why the figures shared with him did not align.
Earlier, the delegation also met with members of the Senate Standing Committee on Finance and the Chairman of the Board of Investments.
The investors explained the concept of Free Zones worldwide and the illogical decision to collect GST in the import phase, when the full amount would be refunded against hidden costs. Industries in the EPZs would become unfeasible and eventually close, leading to a $13.6 million loss from the treasury they are currently collecting.
Investors appreciated the prime minister’s patient hearing and his assurance of a follow-up meeting for a final resolution of the issue.
The delegation of investors included Mustafa Hemani, Muhammad Idrees Gigi, Waseem Akhter, Sadiq Ali Haji, Iqbal Ayub, Muhammad Hassan Siddiq, Khawaja Masood Akhtar and Javaid Mahmood Sethi.
