Repayment of tax to registered persons

Repayment of tax to registered persons

In a move aimed at fostering economic development in Azad Jammu and Kashmir (AJK), the Federal Board of Revenue (FBR) has introduced a provision allowing for the repayment of tax to individuals and businesses registered in the region.

This development is encapsulated in Section 61A of the Sales Tax Act, 1990, as part of the updates incorporated through the Finance Act, 2021.

The Sales Tax Act, 1990, is a pivotal piece of legislation that governs taxation on the sale and supply of goods in Pakistan. The recent amendments, particularly in Section 61A, underscore the government’s commitment to regional development and the facilitation of economic activities in AJK.

The text of Section 61A reads, “Subject to such conditions, limitations or restrictions as it may deem fit to impose, the Board may authorize the repayment in whole or in part of the input tax paid on any goods acquired in or imported into Pakistan by the persons registered in Azad Jammu and Kashmir as are engaged in making of zero-rated supplies.”

This provision is a noteworthy step towards incentivizing businesses in AJK, particularly those involved in zero-rated supplies. The FBR, through its discretionary powers, can now authorize the repayment of input tax paid on goods acquired within Pakistan or imported into the country by registered individuals or entities based in AJK.

The move aims to promote economic activities, encourage investment, and enhance the competitiveness of businesses in AJK by reducing the financial burden associated with input taxes. By facilitating the repayment of taxes on goods used in the production of zero-rated supplies, the government seeks to create a favorable environment for businesses operating in AJK.

While the provision outlines the broad framework for tax repayment, the specific conditions, limitations, and restrictions that the FBR may impose remain to be seen. This discretionary authority allows the FBR to tailor the implementation of the provision based on evolving economic conditions and the needs of the region.

The inclusion of Section 61A aligns with the government’s broader strategy to promote regional development and bridge economic disparities among different parts of the country. By recognizing the unique challenges and opportunities in AJK, the FBR aims to create an enabling environment that supports businesses and encourages investment in the region.

Businesses and individuals registered in AJK are likely to welcome this development as it not only reduces their tax burden but also enhances their competitiveness in the market. The provision is expected to have a positive impact on the overall economic landscape of AJK, attracting potential investors and promoting sustainable growth.

As the FBR moves forward with the implementation of Section 61A, stakeholders in AJK will be keenly observing the specific conditions and limitations that may be imposed. Clarity on these aspects will be crucial for businesses to fully leverage the benefits of the tax repayment provision and contribute to the economic development of Azad Jammu and Kashmir.