Federal Budget

Tax exemptions results in Rs2,240bn dip in revenue collection

Tax exemptions results in Rs2,240bn dip in revenue collection


Amount increased from Rs1,757.035bn recorded last fiscal year

ISLAMABAD (Web Desk) – The government is unable to tackle the issue of tax exemptions despite the urgent need to enhance revenue collection, as the total amount surged to Rs2,239.6 billion in 2022-23 when compared with Rs1,757.035bn recorded during 2021-22.

According to the figures shown by the Pakistan Economic Survey 2022-23, various businesses, sectors, lobbies and investors continue to be a huge burden for the state and the government.

It is sales tax exemptions which caused the largest loss of Rs1,294bn during the current fiscal year – from Rs578bn in 2021-22 by Rs716bn. And the single-largest contributor to this surge were the petroleum products, showing a massive revenue loss of Rs632,950bn.

Meanwhile, the sales tax exemption on cellular mobile phones caused a revenue loss of just Rs1,021 million in 2022-23 as compared to Rs45.9bn during 2021-22 representing a huge increase.

However, there has been a marked increase in the case of imports where the Federal Board of Revenue (FBR) suffered a loss of Rs257bn during 2022-23 as compared to Rs527bn recorded last fiscal year.

Same is the case with sales tax exemption on local supplies with a loss of Rs133,178bn in 2022-23 as compared to Rs233.541bn in 2021-22.
When it comes to the cost of income tax exemptions, the amount stood at Rs423.9bn against the previous year’s total of Rs399.662 bn. The similar figures in the customs duty category was Rs521.7bn in 2022-23 against Rs342.890bn in 2021-22, reflecting an increase of Rs178.81bn.

The accumulative revenue loss on account of tax credits amounted to Rs52.133bn in 2022-23 against Rs65.465bn in 2021-22, showing a decrease of Rs13.332bn.

But there was a massive revenue loss of Rs390bn in 2022-23 as compared to Rs760.543bn in 2021-22 due to sales tax exemptions available under the Sixth Schedule (Exemption Schedule) of the Sales Tax Act.

Another major contributor with a loss of Rs102.658bn in 2022-23 against Rs46.105bn during 2021-22 were tariff concessions and exemptions available was under Free Trade Agreements (FTAs) and the Preferential Trade Agreements (PTAs).