Pakistan takes step to reduce operating costs of all registered airlines
Pakistan has expanded sales tax relief for its aviation
sector by extending exemptions on the import and lease of aircraft and aircraft
parts to all airlines registered in the country, broadening a tax concession
that was initially proposed exclusively for the national flag carrier.
The measure, enacted through the Finance Act, 2026,
amends the Sales Tax Act, 1990, and is aimed at reducing operating costs and
encouraging investment across Pakistan's aviation industry.
Under the original Finance Bill, 2026, the exemption was
limited to Pakistan International Airlines Corporation Limited (PIACL).
However, lawmakers expanded the provision in the final legislation to cover all
airline companies registered in Pakistan, providing equal tax treatment for
eligible operators.
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Effective July 1, 2026, the exemption applies to the
import or lease of aircraft and aircraft parts by any registered Pakistani
airline. The Finance Act also preserves the existing sales tax exemption
available to PIACL, allowing the national carrier to continue importing or
leasing aircraft and related components without incurring sales tax.
The legislation includes safeguards to prevent misuse of
the concession. Customs authorities are required to ensure that imported
aircraft parts, materials, and related articles are limited to quantities
reasonably necessary for the operation and maintenance of aircraft owned or
operated by the importing airline.
Additionally, ground handling equipment, operational and
service vehicles, catering equipment, and fuel trucks imported under the
exemption—provided they are not manufactured locally—must be used exclusively
within airport premises.
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The expanded tax relief is expected to lower the cost of
fleet acquisition, aircraft maintenance, and operational modernization for
Pakistan's airlines. Industry observers say the measure could encourage
investment in newer aircraft, improve operational efficiency, and strengthen
the long-term competitiveness of the country's aviation sector.
The exemption forms part of the government's broader fiscal reforms under
the Finance Act, 2026, which seek to promote private investment, enhance
industrial competitiveness, and support growth across key sectors of the
economy.
Source: pkrevenue.com