IMF agrees to remove 18pc GST on new aircraft to facilitate PIA privatisation

ISLAMABAD: The International Monetary Fund (IMF) has indicated its willingness to remove the 18 percent General Sales Tax (GST) on new aircraft acquisitions if Pakistan International Airlines (PIA) is privatised. This development, aimed at promoting private sector investment in the aviation industry, was discussed in a meeting of the Standing Committee on Privatization, chaired by Muhammad Farooq Sattar, reported the Business Recorder.

During the meeting, the Privatisation Commission chairman provided updates on PIA’s potential privatisation, noting that the second attempt is now fully prepared, with multiple returning bidders actively engaged in the process. In the previous bidding round, participants had called for the elimination of the 18 percent GST to facilitate the purchase and expansion of aircraft.

Also read: Govt aims to conclude PIA privatisation by end of fiscal year

PIA’s outstanding liabilities currently stand at Rs45 billion, which includes Rs26 billion in tax dues to the Federal Board of Revenue (FBR), Rs10 billion owed to the Civil Aviation Authority (CAA), and additional pension liabilities. The government conveyed these challenges to the IMF, which agreed to consider removing the GST on the condition that PIA is privatized, along with creating a strategy to manage PIA’s existing debts to mitigate barriers for potential buyers.

The committee also discussed that non-core assets of PIA would not be included in the bidding process. The government is developing a separate policy regarding these assets and has engaged a consultant to propose multiple options, which will be presented to the Cabinet Committee on Privatization (CCoP) for approval.

Farooq Sattar highlighted the importance of ensuring job security for PIA employees for at least five years post-privatization. The Privatization Commission reassured that employee protection would be a priority, with measures finalized prior to the commencement of the bidding process.

Additionally, the committee reviewed the “Privatization Commission (Amendment) Bill 2024.” Concerns were raised regarding Clause 4, Section 7(4), as members questioned whether it is customary for the prime minister to hold sole authority over privatization decisions rather than the Cabinet. The Ministry of Law was asked to provide clarification in the next meeting, leading the committee to defer the bill until then.