The sources said, at a meeting last month under the chairmanship of Secretary Water and Power, M/s Karkey averred that the Federal Board of Revenue (FBR) has issued special exemption order no. 35/2010 on August 6, 2010, exempting the power ship from payment of customs duty chargeable thereon subject to certain terms and conditions. However, the company has been specified as importer of the power ship whereas the Rental Services Contract of April 23, 2009 between the company and the Lakhra Power Generation Company Limited (the buyer) stipulates that it (the buyer) shall be importer of record and shall be responsible for obtaining the required temporary import and export licences.
According to sources, the meeting decided that PPIB shall convey a request to the FBR for partial modification of the special exemption order such that M/s Karkey is substituted with the buyer as importer of the ship.
The FBR representative of expressed no objection to change the name of the importer in accordance with the Rental Services Contract. With regard to sales tax, the FBR stated vide letter No 4/4-STB/2007 (pt) 110921-R248 and Sixth Schedule of the Sales Tax Act, 1990 that power plants and ships are separately not chargeable and are exempt.
With regard to the income tax, sources said, the company pleaded that six percent withholding tax shall be treated as full and final tax liability without the requirement of filing or declaring its annual income. The FBR was of the opinion that no project specific exemption can be provided and the income generated from the production and sale of electricity has to be assessed and taxed according to the applicable taxation regime and for that the company has to approach the relevant Income Tax Commissioner. The PPIB pointed out that the company was liable to pay withholding tax at the rate of 6 percent and had to be assessed in accordance with applicable laws of income tax as the rental services contract was governed by the laws of Pakistan. Moreover, it was explained that in order to avoid discrimination the tax regime and/or its applicability should be neutral and irrespective of the status of the company whether resident or non resident. It was decided that the company will take up the matter with the FBR for its resolution prior to the end of financial year 2010-11.
It was further agreed and decided that only amendments to the extent of section 9 of the 'side agreement' (and nothing beyond that whether material or otherwise) shall be discussed and finalised. Similarly, it was decided that M/s NTDC would undertake maintenance of approximately 350 meters of interconnection and transmission line between the switchyard of the company on board the power ship and first tower erected by KSEC, M/s Karkey undertook to provide sufficient spares to facilitate maintenance with no extra charges.
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