Karachi, April 21, 2025 – The Karachi Chamber of Commerce and Industry (KCCI) has strongly urged the Federal Board of Revenue (FBR) to abolish the Minimum Withholding Tax (WHT) on raw material imports by commercial importers in the upcoming federal budget for 2025-26.
In its detailed tax proposals, the KCCI pointed out that commercial importers are currently subjected to WHT ranging from 2% to 5.5%. This tax rate is unjustified considering that the gross profit margins on raw materials, which are sold without any value addition or change in form, range between only 2% to 3%. The existing WHT structure effectively assumes a 30% gross profit, which is entirely unrealistic for this sector.
The chamber highlighted that after an amendment to Section 148 of the Income Tax Ordinance, 2001 through the Finance Bill 2018-19, WHT paid on the import of raw materials was reclassified as Minimum Tax, moving commercial importers out of the Fixed Tax Regime (FTR). This shift, according to KCCI, unfairly burdens compliant businesses while allowing undocumented entities to continue evading taxes.
The KCCI criticized this policy for placing the onus of tax collection on law-abiding taxpayers instead of the FBR actively identifying and penalizing non-compliant entities. With the FBR having access to taxpayer data through Sections 56A and 56B, the chamber argued, tax enforcement should be focused on the informal sector rather than adding to the load on documented businesses.
Calling the Minimum WHT regime counterproductive, KCCI emphasized that it discourages formalization and undermines the goals of a fair, broad-based taxation system. The chamber recommended that WHT on raw materials should be fully adjustable against the actual income tax liability.
Additionally, KCCI proposed reinstating the Fixed Tax Regime for finished goods importers and distinguishing clearly between importers of raw materials (who serve as a supply lifeline to industries) and finished goods traders.
Eliminating Minimum WHT would revitalize the operations of commercial importers, support small and medium enterprises (SMEs), and enhance revenue through increased business activity, the KCCI concluded.