PIA to pay Rs 9.3b on acquiring 4 aircraft on lease

Pakistan International Airlines Corporation Limited (PIA) has acquired four A-320 aircraft on a dry lease basis for a period of 72 months at a cost of Rs. 9.388 billion.

Sources told NewzTodays that the first aircraft had already arrived in Pakistan.

However, the Federal Board of Revenue (FBR) refused to release this aircraft PIA acquired on lease due to non-payment of general sales tax.

In an order to release aircraft, the Economic Coordination Committee (ECC) has recently decided that PIA would pay general sales tax to FBR in instalments.

The Aviation Division had informed ECC that Pakistan International Airlines Corporation Limited (PIACL) was going to induct four A-320 aircraft on a dry lease basis for a period of 72 months.

It said that the lease rental value of these aircraft was Rs. 9.388 billion approximately.

First PIA Aircraft on lease arrives

As per the agreement between PIACL-CGACS, the first aircraft already had arrived at New Islamabad International Airport (IAP) on  April 29, 2022.

The Aviation Division said that the other three aircraft would arrive in Pakistan in the coming weeks.

 Currently, PIACL had faced financial constraints and was not in a position to pay GST @ 17% on the total rental value of Rs.9.388 billion, which amounted to Rs.1.596 billion in a lump sum.

In view of this, the Aviation Division and PAICL approached the FBR to make the payment of GST @ 17% in monthly instalments.

Tax Payment dispute with FBR

Aviation Division requested FBR for the immediate release of the aircraft that had already arrived at Islamabad International Airport (IIAP) on upfront payment of GST in two instalments.

Additionally, FBR observed that there was no provision under the Sales Tax Act, of 1990, to allow payment of due sales tax on an instalment basis.

On recommendations from the FBR, the aviation division had placed the matter before the ECC.

In response to a query, officials informed ECC that in the past, ECC had approved payment of GST in instalments, in similar pressing circumstances.

Meanwhile, the FBR also shared that it was going to place the matter for payment of GST in instalments in the Finance Bill 2022-23.

Check Out: Roosevelt hotel PIA: Rs 275m approved for legal battle

 Moreover, PIACL stated that keeping in view that the Hajj season was also approaching, it had requested the ECC to allow payment of sales tax for the leased aircraft on an instalment basis so that the aircraft could be used during the Hajj operations.

The Aviation Division sought approval from the ECC to allow the payment of GST at 17%, i.e., Rs.1.596 billion approximately, on a total rental value of Rs.9.388 billion of 04 A320 leased aircraft, on a monthly instalment basis over the lease term of six years.

This period will start from the date of arrival, including the first aircraft that have already arrived.

Meanwhile, the Economic Coordination Committee (ECC) of the Cabinet considered the summary submitted by the Aviation Division regarding “Request for Paying Sales Tax for Leased Aircraft on an Installment Basis” and, keeping in view the need for additional aircraft to carry out Hajj operations, allowed modification in the mode of payment.