FE Today Logo

Deep cuts in corporate tax for specific products

NBR's income-tax SRO reduces rates to help local manufacturing growth

FE Report | October 28, 2021 00:00:00

Government's revenue authority slashed corporate tax sharply for local manufacturers of a number of products for a longer term until June 30, 2032, as a measure for manufacturing sector to flourish.

Manufacturers of refrigerators, complete freezers with spare parts, motorcycles, air-conditioners and their compressors will enjoy 10-per cent concessionary tax rate on their incomes for the period after the date of commencing commercial production, according to the National Board of Revenue (NBR) notification.

Income-tax wing under the Internal Resources Division (IRD) issued a Statutory Regulatory Order (SRO) on October 21, 2021 to give effect to the cut-down corporate-tax rate.

Currently, the manufacturers of those products are required to pay corporate tax at regular rates, like other companies, ranging from 22.5 to 30 per cent on the basis of categories of companies.

However, the income-tax wing of the revenue board has tagged some conditions to availing the concessionary tax.

The company will have to invest at least 10 per cent of its tax-exempted income within next three years in its industry or new industrial undertaking.

The 'investment' has been defined in the SRO as increasing own production capacity and purchase of machinery for constructing physical infrastructure.

"Manufacturing companies will have to be registered under the Company Act 1994, have capacities to manufacture mould and dices on their own, have own poly urethane foaming plant, power-coating plant and waste- management plant," the SRO says.

The existing manufacturing industry that has reconstructed businesses or classified as new businesses or industry formed through transfer of machinery or building structure would not be entitled for the reduced rate of tax.

However, industries that have been enjoying 5.0-per cent tax rate under an SRO issued in 2009 would continue to avail the facility until its tenure ends.

After expiry of their tenure under the SRO, those industries would have to pay 10-per cent tax until June 30, 2032.

[email protected]

Share if you like