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Government Mulls Extending Tax Benefits for Merged KP Districts in Upcoming Budget

During recent virtual discussions with the International Monetary Fund (IMF), the federal government indicated its contemplation of extending tax exemptions for the newly merged districts of Khyber Pakhtunkhwa (KP) in the upcoming fiscal year, according to sources familiar with the matter.

Sources within the Federal Board of Revenue (FBR) revealed that a proposal to prolong these exemptions in the new budget is presently under scrutiny. These exemptions would specifically apply to imported machinery for the newly merged districts, formerly part of the Federally Administered Tribal Areas (FATA).

Businesses and factories operating in these regions would be spared from income tax, sales tax, and Federal Excise Duty (FED), the sources added.

The consideration for extending these tax exemptions stems from the ongoing economic difficulties faced by the region. Initially set to expire at the conclusion of 2023, the proposal now suggests extending them for an additional year.

While the IMF had advised against continuing the tax exemptions for the former FATA regions, the government appears inclined towards maintaining them for another year.

Additionally, there is a proposition to establish a checkpost at the borders of the ex-FATA region. Sources indicate that this measure aims to ensure that tax-exempt machinery intended for development in the merged districts does not unlawfully enter other parts of the country without paying appropriate duties.

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