Letters of credit (L/Cs) will be exempt from a new sales tax for a short window if Pakistan's government introduces, as anticipated, the tax on previously exempted items in the federal 2015-16 budget.

The proposed 5 per cent sales tax is to be introduced from July and will apply to mega projects such as the Dasu and Diamer-Bhasha hydropower schemes, the coal-fired Jamshoro power project and the nuclear power plants in Karachi.

L/C exemption

But in cases where L/Cs are opened before 30 June 2015, the 5 per cent sales tax will not apply an official source told local media.

Pakistan is also contemplating another 17 per cent sales tax might be applied to imports for plant and equipment for certain hotels and water treatment.

Approval required

The government has already levied 5 per cent customs duty on all types of imports for power generation.

The Federal Board of Revenue has put the proposed tax changes forward for the upcoming budget, which is expected to be announced in June.

Prime Minister Nawaz Sharif is yet to approve the proposals.

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