According to Economic Survey 2011-12, the cost of exemptions in respect of direct taxes are worth of Rs 69.608 billion during the outgoing fiscal year, which was Rs 46.508 billion in last financial year 2010-11. Meanwhile, the cost of sales tax exemption has estimated to be Rs 24.3 billion for the fiscal year 2011-12, which was Rs 33.762 billion in last fiscal year. Similarly the cost of customs exemptions has projected to be Rs 91.588 billion against Rs 94.941 billion of the previous year.
The break-up of estimated revenue loss in income tax expenditures revealed that Rs 0.171 billion revenue loss occurred due to exemption given to pensions and gratuity, Rs 6.077 billion on income from funds, board of education, universities and computer training institutions, Rs 0.624 billion on donations and contributions to charitable organisations, Rs 46.939 billion on independent power producers, Rs 1.461 billion on income from certain trust, welfare and charitable institutions non-profit organisations. Similarly, income tax exemption worth of Rs 1.461 billion has been given to the profits on debt/interest from government securities and certain foreign currency accounts etc, Rs 0.822 billion on export of information technology, Rs 2.108 billion on capital gains and Rs 11.201 billion on other sector and enterprise specific exemptions during the outgoing financial year.
According to survey, sales tax exemptions are provided at import stage and on domestic supply of goods and services. Sales tax exemptions were available on certain items including tractors, fertilizers and pesticides. However, the Federal government rationalised these exemptions during last year and from March 15, 2011 onwards tractors, pesticides and fertilizers have been made chargeable to sales tax resulting in reduction of cost of exemptions. The break-up of sales tax exemptions revealed that Rs 4.280 billion on tractors, Rs 5.280 billion on pharmaceutical and Rs 14.220 billion on others were extended in the outgoing financial year.
Meanwhile, customs exemptions are mainly given on raw materials and components, plants, machinery and equipment imported by high-tech, priority and value added industries, imports for energy sector projects and exemptions to exploration and production companies. Some of these exemptions are due to international contractual obligations.
The government has given Rs 91.588 billion customs exemptions during the outgoing fiscal year against the Rs 94.941 billion of the last year 2010-11.