Relief covers penalties on sales tax and federal excise duty dues while principal liabilities remain payable

ISLAMABAD: The Federal Board of Revenue (FBR) has waived default surcharge and penalties imposed on Pakistan International Airlines Corporation Limited (PIACL) against outstanding sales tax and Federal Excise Duty (FED) liabilities amounting to Rs4.47 billion, as part of efforts to support the national carrier’s financial restructuring.

The exemption was granted through S.R.O. 1134(I)/2026, issued by the federal government under Section 34A of the Sales Tax Act, 1990 and sub-section (4) of Section 16 of the Federal Excise Act, 2005.

According to the notification, the waiver covers the entire amount of default surcharge and penalties linked to PIACL’s sales tax liability of Rs1.003 billion and FED liability of Rs3.469 billion.

The liabilities relate to the months of September, October and December 2025, the notification stated.

Cabinet-approved tax relief

The decision was taken in accordance with the Federal Cabinet’s approval dated June 15, 2026, under Case No. 411/Rules-19/2026/497.

The government said the exemption has been provided to facilitate PIACL’s financial transition following the airline’s privatisation process and reduce additional financial pressure arising from accumulated penalties and surcharges.

However, the relief applies only to additional charges and does not eliminate the airline’s principal tax obligations.

PIA must clear tax dues within four years

Under the approved arrangement, PIACL will receive a one-year grace period before beginning repayment of its outstanding sales tax and FED liabilities.

After the grace period, the airline will be required to clear the payable amount over a period of four years through equal annual instalments.

The repayment schedule will begin after the first completion, as defined under the Share Purchase and Subscription Agreement (SPSA) between the Government of Pakistan and the successful bidders.

The FBR clarified that the principal amount of sales tax and federal excise duty remains payable and will be recovered according to the agreed payment mechanism.

Part of PIA restructuring efforts

The latest waiver follows a series of government measures aimed at improving PIACL’s financial position and supporting the successful completion of its restructuring and privatisation process.

Officials said removing the burden of accumulated default surcharges and penalties would help improve the airline’s financial outlook while ensuring that outstanding tax obligations are recovered through a structured repayment plan.

PIA has remained a key focus of the government’s state-owned enterprise reform agenda, with authorities seeking to reduce fiscal pressure and improve operational performance through private sector participation.