The Government has decided to extend the sales tax exemption currently available to PIA to other locally operating airlines, a significant policy development for Pakistan’s aviation sector. The move is intended to remove differential tax treatment and provide a more level playing field among airlines operating in the country.
PIA had already been granted exemption from 18% sales tax on the procurement and lease of aircraft as part of its privatization framework. Concerns were subsequently raised that providing such a concession only to PIA could place competing airlines at a disadvantage. The Government has therefore decided that similar relief will be extended across the sector.
According to the information presented before the parliamentary committee, the exemption for other airlines is expected to become effective from fiscal year 2027-28, with the relief contemplated for a period of 15 years. If implemented as stated, the measure could materially reduce the tax cost associated with aircraft acquisition and leasing and potentially encourage fleet expansion and investment in Pakistan’s aviation industry.