The Government of Punjab is committed to making the country’s largest province the ideal investment destination in the region. The Strategic Trade Policy Framework 2015-2018 and the federal budget for fiscal year 2016-2017 are both incredibly business-friendly. Punjab’s provincial budget for the upcoming fiscal year also includes a variety of incentives designed to attract foreign investment. Pakistan plans on signing many new Free Trade Agreements (FTA) in the coming months, including trade deals with China, Iran, Indonesia, Malaysia, Mauritius and Sri Lanka.
The government will continue working on its three-pronged strategy of trade diplomacy in the multilateral, regional and bilateral arenas for increasing market access. Under the policy, four products including basmati rice, horticulture, meat and meat products, and jewelry were identified for focused markets — Iran, China, Afghanistan and the European Union.
Below are just a few incentives aimed at increasing investment in Punjab:
- Enhancing Tax Credit on Employment Generation: In order to promote industrial growth and employment generation tax credit at 1 percent of the tax payable for a period of ten years that is allowed for every 50 employees in an industrial undertaking to be set up by June 2018, is proposed to be increased to 2 percent. This concession will be made available for 10 years to the industrial undertakings set up by June 2019;
- Tax Credit for Making Sales to Registered Persons: At present a manufacturer registered under sales tax who is making over 90 percent sales to registered sales tax persons is entitled to a tax credit of 2.5 percent of tax payable. The tax credit is proposed to be enhanced from 2.5 percent to 3 percent of tax payable;
- Tax Credit for Balancing, Modernization and Replacement (BMR) of Plant and Machinery: At present, tax credit on BMR is allowable at the rate of 10 percent of investment against tax payable for two years. In case of investment through 100 percent new equity, tax credit on BMR is allowable at the rate of 20 percent of investment against tax payable for five years. The period is proposed to be extended to 30th June 2019;
- Tax Credit for Establishing New Industry: Till 30 June 2016, 100 percent tax credit on tax payable is allowed if 100 percent fresh equity is raised for establishing new industry through issuance of new shares. This tax credit is allowable for five years from start of commercial production.
- It is proposed to reduce the condition of 100 percent fresh equity to at least 70 percent equity. In addition, period of setting up of new industrial undertaking, which is going to expire on 30th June, 2016 is also proposed to be extended to June, 2019;
- Tax Credit for Expansion of Existing Plant or New Project:
- At present, 100 percent tax credit on tax payable is allowed for expansion of existing plant or new project if 100 percent fresh equity is raised through issuance of new shares. This tax credit is allowable for five years from start of commercial production. It is proposed to reduce the condition of 100 percent fresh equity to at least 70 percent equity. Tax credit would be allowed, proportionately, on owned new equity. In addition, last date for installation of the plant and machinery which is going to expire on 30th June 2016 is also proposed to be extended to June, 2019;
- Exemption on investment in green-field industrial undertakings: Period of exemption to investment in green field industrial undertakings announced under Prime Minister’s package of investment that is going to expire on 30th June 2017 is proposed to be extended up to 30th June, 2019;
- Reduction in Customs Duty on Raw Materials and Machinery: To further increase in GDP of industrial sector existing customs duty of 5 percent will be reduced to 3 percent on two thousand items of mostly machinery and raw materials, which will benefit industrial sector to the tune of Rs.18 billion;
- Abolishing regulatory duty on Bead Wire: Bead wire is the raw material of the tyres manufacturing industry which is currently subject to 10 percent customs duty and 30 percent regulatory duty.
- This item is not locally produced. In order to provide incentive to the local tyres manufacturers, it is proposed that regulatory duty may be exempted on import of Bead Wire.
- Protection of local industry: To incentivize local industry, custom duty on the following items are proposed to be increased by different rates in the Finance Bill 2016:
- Medium density fiber board,
- Cement clinker,
- Methyl Acetate, and
- Semi-Printed / Printed Security Paper