IMF waives GST on purchase of new PIA planes if privatized
The International Monetary Fund
(IMF) has given approval for the Pakistan government to waive the 18% General Sales
Tax (GST) on the purchase of new planes, provided Pakistan International
Airlines (PIA) is privatized. The announcement was made by the chairman of the
Privatization Commission during a parliamentary committee meeting this week.
Pakistan is aiming to privatize PIA
by selling a 51-100% stake in the debt-laden airline as part of its strategy to
raise funds and reform state-owned enterprises, in line with a $7 billion IMF
program. In October 2024, the final bidding process for PIA's privatization saw
only one bid for a 60% stake, from the real-estate development company Blue
World City. The bid of $36 million was significantly below the government’s
minimum price of 85 billion Pakistani rupees, and only one of the six
pre-qualified bidders participated.
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Potential bidders have raised
concerns about policy consistency, contract fulfillment, government
communication, and taxes on the aviation sector, as well as PIA's legacy
issues. PIA’s losses are estimated at around $3 billion, with the airline’s
assets valued at about $572 million.
The chairman of the Privatization
Commission informed the National Assembly Standing Committee on Privatization
that, in previous rounds of bidding, prospective investors had suggested
removing the 18% GST on new aircraft purchases to encourage fleet expansion.
This, they argued, would stimulate the growth of the aviation industry.
The government presented this
request to the IMF, which agreed that the tax could be waived if PIA were
privatized, in order to encourage private investment in new aircraft.
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PIA’s liabilities currently total Rs
45 billion ($162 million), and the government is developing a strategy to
manage these financial burdens, ensuring they do not deter potential buyers.
This move comes shortly after PIA
resumed operations in Europe, following a ban by the European Union Aviation
Safety Agency (EASA) in 2020. EASA and UK authorities had suspended PIA’s
flight operations due to concerns over the validity of pilots' licenses after a
deadly crash in 2020. The lifting of these restrictions, along with the
addition of new European routes and approval to fly to the UK, is expected to
enhance PIA’s appeal to investors.
Source: Arab News