ISLAMABAD: The federal government has decided to establish Special Technology Zone Authority (STZA) through an Ordinance under the Cabinet Division, with almost similar incentives available to Special Economic Zones (SEZs), well informed sources told Business Recorder.
The government is establishing STZA at a time when the existing investors who established projects/industry in SEZs maintain that turnover tax is the main reasons for the lack of success in the Zones.
On November 24, 2020, Cabinet was informed that a meeting regarding creation of Special Technology Zones Authority was held in the Prime Minister’s Office on November 5, 2020. The spirit behind creation of these zones was to provide institutional and legislative support for national technology sector with internationally competitive and export-oriented structures and ecosystem, in addition to developing collaboration between academia, research and technology industry. This would help in creating jobs in the technology sector, capitalizing on our youth dividend. Creation of the Authority will also build an environment, which would attract foreign direct investment, apart from improved quality of domestic technology products and services and fostering innovation.
The Prime Minister directed that the Authority be established under the Cabinet Division. The Cabinet Division was further directed to finalize the draft legislation (Ordinance) and move a case for its promulgation within two weeks. The proposed draft of the legislation was shared with the Law and Justice Division for vetting, and with the Finance Division, the Federal Board of Revenue and the State Bank of Pakistan for comments and views of the above entities, which had been mainly incorporated in the draft legislation.
Accordingly, Cabinet Division sought the approval of the Cabinet to the draft legislation for creation of Special Technology Zone Authority, in terms of Rule 16(1)(a), read with Rule 27 (1), of the Rules of Business, 1973. It was also submitted that, in order to meet the given timeline, the Federal Cabinet may invoke the provisions of Rule 27 (5A) and dispense with the requirements of clause (a) of Rule 27 sub-rule 5 of the Rules.
Since the Parliament was not in session, the Cabinet may like to grant approval for promulgation of the legislation through an Ordinance, subject to final vetting by the Law and Justice Division, it was proposed.
According to sources, the observations of the relevant Ministries were enclosed with the summary for the Cabinet, however, for further discussion and input, the secretaries of Law and Justice, Establishment, Finance Divisions, Chairman FBR and the Governor State Bank of Pakistan were also invited for the subject agenda.
The Prime Minister highlighted the need for creation of the Authority being vital for economic uplift and the Cabinet fully endorsed the rationale behind creation of the proposed Authority.
The Finance Division raised observations on the provisions of Section 21(b) and 22(b) of the proposed ordinance and suggested amendments in the said Sections to put a time limit of ten years on the exemption from Custom duties and taxes. The Cabinet, after going through the proposed legislation and the views of the Ministries endorsed the creation of the proposed Authority with minor changes as identified by the Finance Division.
The Federal Cabinet in pursuance of rule 27(5A) of the Rules of Business, 1973 dispensed with the requirement(s) of rule 27 sub- rule (5) (a) of the rules and accorded approval of the draft legislation subject to amendment in section 21(b) and 22(b), which will read as under:
Incentives for zone developers. – exemption from all custom duties and taxes for a period of ten years from the date of signing of the development agreement on capital goods including but not limited to materials, plant, machinery, hardware, equipment and software imported into Pakistan for consumption within zones by the Authority and zone developers; and Incentives for zone enterprises.
The projects to be established under the STZA will be exempted from all custom duties and taxes for a period of ten years from the date of issuance of licence by the Authority on capital goods including but not limited to materials, plant, machinery, hardware, equipment and software imported into Pakistan for consumption within zones by the Authority and zone enterprises.
Since the Parliament is not in session, the Cabinet also approved the promulgation of the legislation through an Ordinance, subject to vetting by the Law & Justice Division.