KCCI urges government to review Finance Act 2026 measure as exporters warn of severe supply chain disruption
KARACHI: Pakistan’s mineral exporters have warned that a 5% withholding sales tax on locally procured minerals, introduced under the Finance Act 2026, has brought the country’s mineral exports to a near standstill, prompting the Karachi Chamber of Commerce and Industry (KCCI) to urge the government to immediately review the measure.
The concerns were raised during a meeting between a delegation of the Mines & Minerals Association, led by Syed Muhammad Akram, and KCCI President Rehan Hanif. The meeting was attended by Senior Vice President Muhammad Raza, Vice President Muhammad Arif Lakhani, Chairman of KCCI’s Federal Taxation Subcommittee Abu Bakar Shamsi, former Executive Committee member Asif Bega, and other representatives.
Export supply chain disrupted
Speaking on behalf of the delegation, Akram said Pakistan’s minerals sector is overwhelmingly export-oriented, with most production shipped overseas while domestic industrial consumption remains limited.
He said exporters have been designated as withholding agents and are now required to deduct 5% sales tax from payments made to suppliers, mine owners and brokers.
According to Akram, the industry depends on hundreds of small-scale, undocumented suppliers operating in remote mining regions, many of whom sell between 10 and 50 tonnes of minerals. Since the tax came into effect on July 1, 2026, many suppliers have refused to accept the deduction, disrupting the flow of raw materials.
He warned that exporters are struggling to secure sufficient supplies to fulfil export orders, letters of credit (LCs) and contractual commitments with overseas buyers, putting Pakistan’s credibility in international markets at risk.
Export viability under threat
Akram said profit margins in the mineral export business typically range between 2% and 3%, making it commercially unfeasible for exporters to absorb a 5% withholding sales tax.
He cautioned that the measure could make exports financially unsustainable and force many businesses to suspend operations.
Highlighting the sector’s recent performance, Akram said chromite exports increased from around $94 million in FY2024-25 to nearly $130 million in FY2025-26, representing growth of approximately 35% without government subsidies, incentives or rebate schemes.
He urged the government to withdraw the withholding tax provision immediately to prevent long-term damage to a sector that earns valuable foreign exchange for Pakistan.
KCCI pledges support
KCCI President Rehan Hanif assured the delegation of the chamber’s full support in taking up the issue with policymakers and tax authorities.
He said KCCI would examine the legal, taxation and procedural implications of the new withholding tax regime and prepare a comprehensive proposal highlighting its impact on Pakistan’s export-oriented minerals industry.
Hanif added that the chamber would engage with the Federal Board of Revenue (FBR) and recommend that the withholding sales tax provisions be reviewed and rationalised in consultation with stakeholders.
He stressed that government policies should facilitate exports and strengthen competitiveness rather than impose additional compliance burdens on exporters.