FBR exempts PIA of Rs4.47 billion in surcharges and tax penalties
The Federal Board of
Revenue (FBR) has waived default surcharges and penalties imposed on Pakistan International Airlines Corporation
Limited (PIACL) on outstanding sales tax and Federal Excise Duty (FED)
liabilities totalling Rs4.47 billion, as part of the government's efforts to
support the national carrier's financial restructuring.
The exemption was granted through S.R.O. 1134(I)/2026,
issued under Section 34A of the Sales Tax Act, 1990, and Section 16(4) of the
Federal Excise Act, 2005.
According to the notification, the waiver applies to all
default surcharges and penalties associated with PIACL's outstanding sales tax
liability of Rs1.003 billion and FED liability of Rs3.469 billion. The tax
liabilities relate to the months of September, October, and December 2025.
Cabinet-Approved Relief
The tax relief was approved by the Federal Cabinet on June
15, 2026, under Case No. 411/Rules-19/2026/497, as part of measures aimed at
facilitating PIACL's financial transition following its privatisation process.
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The government said the exemption is intended to reduce
the airline's financial burden by removing accumulated penalties and default
surcharges while ensuring that the principal tax liabilities remain
recoverable.
Principal Tax Dues Remain Payable
Under the approved repayment arrangement, PIACL will be
granted a one-year grace period before repayments begin on its outstanding
sales tax and FED liabilities.
Following the grace period, the airline will be required
to settle the principal tax dues over four years through equal annual
instalments.
According to the notification, the repayment schedule
will commence after the First Completion as defined in the Share Purchase and
Subscription Agreement (SPSA) between the Government of Pakistan and the
successful bidders.
The FBR clarified that the waiver applies solely to
default surcharges and penalties and does not exempt PIACL from paying its
principal sales tax and federal excise duty obligations.
Supporting Financial Restructuring
The latest tax relief forms part of a broader government
strategy to strengthen PIACL's financial position and facilitate the successful
implementation of its restructuring and privatisation programme.
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Officials said removing accumulated penalties and
surcharges will improve the airline's financial outlook while allowing
outstanding tax liabilities to be recovered through a structured repayment
mechanism.
PIACL remains a central component of the government's state-owned enterprise
reform agenda, with authorities aiming to improve operational efficiency,
reduce fiscal liabilities, and encourage greater private sector participation
in the aviation sector.
Source: pkrevenue.com