Islamabad: A parliamentary committee on Thursday deferred approval of proposed tax exemptions for Pakistan International Airlines (PIA). Lawmakers raised concerns that the concessions would give the national carrier an unfair advantage over other airlines.
The National Assembly Standing Committee on Finance asked the government to reconsider the plan. Members said the policy should either apply to all airlines or not be limited to PIA alone.
The issue emerged during clause-by-clause review of the Finance Bill 2026-27.
Lawmakers Question Exclusive Benefits
Committee Chairman Syed Naveed Qamar said the proposal placed the government in a difficult position.
He said the options were clear: withdraw the exemptions or extend them to all airlines.
“We are stuck in a bind,” he said, adding that fairness in the aviation sector must be ensured.
As a result, the committee postponed a final decision and asked the government to review the matter.
Buyers Did Not Ask for Special Treatment
A key development came when Privatisation Secretary Usman Bajwa briefed the committee.
He said the buyers of PIA did not request exclusive tax exemptions.
Instead, they sought long-term policy stability and consistent rules for investment.
“The bidders did not ask for preferential treatment,” Bajwa said.
He added that the government itself decided to offer tax relief only to PIA for 15 years.
This statement shifted the focus of debate toward government policy decisions.
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Government Warns of Legal and IMF Issues
Minister of State for Finance Bilal Azhar Kayani cautioned against reversing the proposal.
He said the tax exemptions were part of commitments linked to the privatization agreement.
He warned that withdrawing them could create legal and contractual issues.
Kayani said the government would revisit the matter with the International Monetary Fund (IMF) before responding to the committee.
Officials also warned that the deal could be affected if agreed incentives were not implemented.
The transaction is expected to close by mid-July, subject to final approvals.
PPP Raises Concerns Over Fair Competition
PPP MNA Sharmila Faruqi opposed the proposal.
She said granting tax benefits to only one airline would hurt competition.
“This is unfair to existing airlines and discourages new entrants,” she said.
Other members also raised concerns about unequal treatment in the aviation sector.
What Tax Exemptions Are Being Proposed?
Under the proposal, PIA would be exempt from 18 percent sales tax on the import, purchase, and lease of aircraft and parts.
The airline would also receive customs duty exemptions on imported aircraft under wet or dry lease arrangements.
Finance Secretary Imdadullah Bosal said the exemptions were included on the recommendation of a committee headed by Deputy Prime Minister Ishaq Dar.
He added that the government had already negotiated the package with the IMF, and extending it to all airlines would be difficult.
PIA Privatization Deal Worth Rs180 Billion
The discussion comes after the privatization of PIA to a consortium led by Arif Habib.
The deal is valued at Rs180 billion.
Major shareholders in the consortium include:
- Arif Habib Corporation and Fatima Fertilizer (34.1%)
- Fauji Fertilizer Company (34%)
- Lake City Holdings (14%)
- AKD Group (10.25%)
- City Schools (7.65%)
Officials say the privatization is part of broader economic reforms aimed at improving state-owned enterprises.
Committee Also Expands Sales Tax Net
In a separate decision, the committee approved the addition of 116 items to the Third Schedule of the Sales Tax Act.
The move is expected to generate around Rs50 billion in additional revenue for the Federal Board of Revenue (FBR).
The Third Schedule taxes goods on their printed retail price rather than their manufacturing cost.
Newly included items range from food products and beverages to footwear, household goods, toiletries, and ceramics.
Officials said prices of some products may increase temporarily before stabilizing.
Lawmakers, however, raised concerns about implementing market-based pricing on imported goods.
FAQs
Why did the NA committee delay PIA tax exemptions?
Lawmakers said the proposal could give PIA an unfair advantage over other airlines.
Did PIA buyers request tax exemptions?
No. Officials said investors asked for policy stability, not special concessions.
What exemptions are being proposed?
The package includes sales tax and customs duty exemptions on aircraft imports and leases.
Could the privatization deal be affected?
Officials warned that changing agreed terms could affect the finalization of the deal.
How much was PIA sold for?
PIA was sold for Rs180 billion to a consortium led by Arif Habib.
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