LAHORE - The aircraft manufacturing industry of the country is fighting for survival due to heavy taxes imposed by the present government on import of spare parts. Chief Executive of the industry in a letter written to Prime Minister of Pakistan said, “Since 2009, we have had no sale at all as our aircraft have become more expensive than the imported aircraft”.

In 2011, the Government excluded aircraft from sixth schedule using Finance Act 2011. This taxation structure changed results for our company. As our company was now expected to pay sales tax both on import of raw materials and supply of the completed aircraft. This resulted in an imbalance that pushed us into extreme losses. We had to stop our expansion, layoff staff and strive for sustaining this infrastructure of national interest.

The letter further reads, this year, during budget the aircraft manufacturing industry was expecting that relief would be provided to them as per the previous 5 drafts of the National Aviation Policy. Unfortunately the government gave relief to selected aviation operators and maintenance companies, totally neglecting the aircraft manufacturing industry and supply chain setups. The current budget proposes only the import tax to be exempted, whereas the tax on supply would remain effective. This will mean imported aircraft would become cheaper than the aircraft manufactured in Pakistan. This would also mean the supply chain setups would have to be shut down as they will no more be profitable. Like all previous governments, the current government should extend all facilities to each and every licence holder of the aviation industry hence providing a level ground for all players of the industry. The zero tax incentive should also be given on exports of aviation parts/ airworthy aircraft to promote manufacturing industry of Pakistan.

Investment Division & Board of Investment, played a vital role in helping us resolve our factory space allocation issues with CAA through the Secretary, Ministry of Defense. During this time we were given an option to move to UAE as their government was interested in such a venture and was willing to provide factory location with all associated facilities free of cost. Realising this fact, DG CAA issued a directive to all Directors to cooperate and extend maximum possible assistance in the matter so that the project is undertaken at priority. As an incentive, DGCAA agreed to provide the facility of zero per cent taxes, duties and surcharges on all imports, exports and local market supplies made by our company. During this time the aircraft were categorised at serial 43 of The Sixth Schedule of the Sales Tax Act 1990, which exempted Sales Tax on all imports and supplies. In 2006, Civil Aviation Authority of Pakistan (CAA) integrated this incentive in to the draft aviation policy 2007 whereby agreeing that a tax holiday shall be granted to aircraft manufacturers for 10 years. The equipment required for manufacturing, raw materials/parts, molds, precision laser cutting equipment, n-axis CNC (Computer Numeric Control) machines for aircraft manufacturing would be exempted from all taxes, duties and surcharges. Unfortunately, despite of the extreme efforts of CAA, the aviation policy never got implemented, letter maintained.

Keeping in view the importance of this project of national interest, which is a step towards self-reliance in private sector civil aviation aircraft manufacturing, it currently requires government patronisation to assist its infancy growth. It is therefore requested that measures should be taken immediately to rectify the imbalance before further damage is done and the industry is crushed into unrecoverable losses, letter concluded.