NA body defers PIA tax exemption

Committee gives govt option to either withdraw concessions or extend to all airlines

The National Assembly standing committee on finance Thursday deferred approval of sweeping tax exemptions for Pakistan International Airlines (PIA). giving the government an option to either withdraw them or extend them to all other airlines to end discrimination.

The committee took the decision after Secretary Privatisation Usman Bajwa disclosed. the new buyers did not ask for exclusive preferential exemptions; their demand was for 15 years of concessions to ensure policy consistency

The disclosure contradicted the earlier perception that the new buyers wanted preferential treatment. Pakistan Peoples Party (PPP)'s Syed Naveed Qamar chaired the committee meeting that is approving clause-by-clause the new Finance Bill 2026-27.

"The bidders did not ask for preferential treatment; it was the government's decision to give the tax exemptions to only PIA for 15 years," Bajwa disclosed. He was called by the committee to explain the situation after the finance ministry proposed an 18% sales tax exemption only for PIA on procurement. lease of aircraft.

The bidders had demanded tax concessions and nine items would be incorporated in the law, said Bajwa.

"We are stuck in a bind. Being in the International Monetary Fund (IMF) programme. the government has to see whether it wants to withdraw the tax exemption or give it to everybody," Qamar said while giving the government an option before putting the matter to a vote.

"Rolling the tax exemptions back is not a choice as it will violate the sale purchase agreement," said Bilal Azhar Kayani. Minister of State for Finance. Kayani said the government would again take up the matter with the IMF in light of these discussions. revert to the committee.

MNA Sharmila Faruqi raised the issue of giving preferential treatment to the buyers of PIA at the expense of the rest of the private sector airlines. "This is serious injustice to the existing as well as the new airlines. may start operations in Pakistan," she said.

The Arif Habib-led consortium acquired 100% stakes in PIA for Rs180 billion. According to publicly available information, Arif Habib Corporation and Fatima Fertiliser Company together held a 34.1% stakein the national carrier. Fauji Fertiliser Company holds 34%, followed by Lake City Holdings 14%, AKD Group 10.25% and City Schools 7.65%.

Secretary Finance Imdadullah Bosal said the new exemptions had been inserted in the Finance Bill on the recommendation of a committee headed by Deputy Prime Minister Ishaq Dar. He said the prime minister had constituted the committee to ensure the buyers did not get any additional incentive.

Subject to approval of these exemptions, the buyers would formally close the deal by mid-July, Bosal said.

The finance ministry took a lot of pain to convince the IMF to give tax exemption to PIA,. it would be difficult to secure it for the entire aviation industry, said Bosal.

The deal would be off if the government did not extend the agreed tax exemptions to the buyers. the privatisation commission secretary said.

According to the proposal pending final vote, import or lease of aircraft. parts by PIACL would be exempted from 18% sales tax. There would also be no customs duty on the import of aircraft. whether imported or acquired on wet or dry lease.

The standing committee chairman said the government should exclude the cost of tax exemption for 15 years from the total sale price of PIA.

The standing committee approved the inclusion of 116 more items in the third schedule of the sales tax law under 21 categories. The move will generate Rs50 billion in additional revenue for the Federal Board of Revenue (FBR).

Under the third schedule. the government collects taxes at the printed market price of goods from manufacturers, expanding the sales tax web to almost every product sold in packaged form in retail stores. Hamid Ateeq Sarwar. member strategic transformation, admitted that prices of these goods would temporarily increase before settling down in the longer run.

Items now taxed at market price include vegetable oil, sugar confectionery, pasta, spaghetti, macaroni, noodles, lasagna, ketchup, sauces, beverages, jellies, insecticides, plates, tableware, toilet articles, school bags, travelling bags, wallets, footwear, crockery, car accessories, milk, shaving goods, jams, ceramic products, tiles, commodes. household utensils.

The standing committee expressed concerns that it would be difficult to charge sales tax at market price on imported goods.

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