Lahore University of Management Sciences (LUMS) has recently been granted tax exemption within the federal allow FY 2020-21 despite collecting hefty fees from students.
Rumors have it that Abdul Razak Dawood, the adviser to the Prime Minister (PM) on Commerce and Investment who is additionally the Pro-Chancellor of LUMS, exercised his influence and managed to urge the tax exemption for LUMS.
Though there’s no official word from LUMS, Adviser to the Prime Minister on Finance, Dr. Hafeez Shaikh’s evasion of an issue regarding tax exemption accorded to LUMS during the post-budget conference over the weekend has raised some eyebrows.
Moreover, it’s reported that LUMS has been exempted from any documentary requirements to make sure that its Non-Profit Organization (NPO) status remains intact. LUMS enjoys tax exemptions under the tax Ordinance 2001, which states:
“An NPO shall be allowed a decrease adequate to 100 percent of the tax payable, including minimum tax and final taxes payable under any of the provisions of this Ordinance.”
Eligibility for the decrease for educational institutes managed by non-profit organizations is defined as:
“Income of a university or other institution being travel by a non-profit organization existing solely for educational purposes and not for purposes of profit is eligible for the decrease.”
It must be noted that no institute are often granted a permanent tax exemption as per clause 36(c) of the tax Ordinance 2001.
NPO status is approved for a specified period, on an application made by such an individual within the prescribed form and manner, amid the prescribed documents and, on requisition, like other documents as could also be required by the ordinance.
However, the Commissioner Inland Revenue of the FBR holds the authority to grant, extend, or revoke an NPO status of a corporation as per Section 2(36) of the tax Ordinance 2001.
“This lends credence to reports that Abdul Razak Dawood, being in one among the foremost important positions within the government, exercised his influence over FBR to urge the NPO status approved and subsequent tax exemptions for LUMS within the budget FY 2020-21.”
Therefore, notwithstanding the recent unreasonable and exorbitant hike of 41% within the semester fee, LUMS will still enjoy tax exemptions listed in Section 100(c) of the tax Ordinance, 2001.