KARACHI: The Federal Board of Revenue (FBR) has been suggested a drastic cut in duty and taxes on import of black to stop smuggling and increase revenue.
The Karachi Chamber of Commerce and Industry (KCCI) in its proposals for budget 2022/2023 submitted to the FBR said that consumption of black tea in Pakistan is 240,000 metric tons, but the imports through legal channels is hardly 100,000 metric tons due to very high rates of customs duty, sales tax, regularity duty and withholding tax.
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Remaining requirement is fulfilled by smuggling, Afghan Transit Trade (ATT), and imports under various exemptions/concessions granted to PATA and Azad Kashmir which conduct 90 per cent of official imports and sold all over Pakistan in tariff areas.
The KCCI said that legitimate importers have been driven out of the market due to distortions in tax and duty regime, while also the government is losing a substantial amount of revenues.
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The black tea imported in bulk and wholesale packing is treated as finished product in 12th Schedule (Table 3) whereas it should be treated as raw material because black tea goes through a process of blending and packaging while also the taxes are charged on maximum retail price.
The KCCI said that black tea is an essential food item used in every household and common man. Such high tariffs while exemptions to select areas are only supporting misuse of concessions and smuggling. The tariff structure may therefore be rationalized as proposed while exemptions to PATA and Azad Kashmir be withdrawn as these are sources of revenue leakages:
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The customs duty should be reduced to 5 per cent from 11 per cent.
The regulatory duty should be brought down to zero per cent from 2 per cent.
The rate of sales tax should be reduced to …. From 17 per cent.
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Whereas, the rate of withholding tax should be reduced to 2 per cent from existing 5.5 per cent.
The chamber said that the proposal would prevent misused of exemptions and significantly increase revenue by Rs70 to Rs.80 billion.
Significant relief to entire population in an essential food item which is most expensive in Pakistan.
