PRIME MINISTER TAX INCENTIVE SCHEME SRO 1065 OF 2013 DATED 20TH DECEMBER 2013

Through SRO 1065 the Federal Government has inserted a new clause (86) in Part-II of the Second Schedule to the Income Tax Ordinance, 2001, which provides that source of investment made by an individual, AOP or a company shall not be probed in terms of section 111 of the Income Tax Ordinance subject to the following conditions:

1. In the case of an individual Investment made in a greenfield industrial undertaking is covered under this SRO.
2. In the case of Association of persons or a company the investments made in an industrial undertaking is covered under this SRO.
3. The said investment should be on or after 1^st day of January 2014.
4. The commercial production should start by 30^th June 2016.

The said scheme would also be available in respect of following sectors, which otherwise do not fall within the definition of ‘industrial undertaking’:

a. Construction industry in corporate sector,

b. Low cost housing construction in the corporate sector,

c. Livestock development projects in the corporate sector,

d. New captive power plants,

e. Mining and quarrying in Thar coal, Balochistan and Khyber Pakhtunkhwa.

Whereas the concession is not available in respect of investment in the following sectors:

i. Arms and ammunitions

ii. Explosives

iii.Fertilizers

iv. Sugar

v. Cigarettes

vi. Aerated beverages

vii. Cement

viii Textile spinning units

ix. Flour mills

x. Vegetable ghee and

xi. Cooking oil manufacturing

The term green field industrial undertaking also include expansion projects.

The last date for availing the benefits of this scheme is extended till 15^th April 2014.

The said SRO creates certain ambiguities, as enumerated below which needs clarification from the Board:

Whether under sub-clause (iii) of clause (85) the concession is available to a company who makes investment in its own unit or the unit other than the IU owned and already run by the said company.

The SRO 1065(I)/2013 also says that the exemption is available in respect of investments made on or after 1^st day of January 2014 and commercial production should commence on before 30^th day of June, 2016. This aspect raises the question whether the scheme under this SRO is available only in respect investment made in a new industrial unit or the units already functional and some sort of expansion is carried on by the company.

The term green field industrial undertaking is used in this clause. However, definition of the said term has neither been given in the SRO 1065 nor available in the Income Tax Ordinance, 2001.

Though it is mentioned in SRO 1065 that term green field industrial undertaking also include ‘expansion of the project’. Is this mean that the expansions other than green filed industrial undertaking shall not fall within the ambit of SRO 1065? This aspect needs clarification.

Under the above circumstances it would be apt if necessary clarification is issued by the Board with regard to the above mentioned queries so as to avoid any sort of ambiguity to be faced by the bona-fide taxpayers availing the benefit of the Prime Minister’s Incentive Scheme.