Karachi, April 13, 2025 – The Karachi Chamber of Commerce and Industry (KCCI) has strongly urged the federal government to eliminate the Value Added Tax (VAT) for commercial importers in the forthcoming federal budget for the fiscal year 2025-26.
In a detailed set of tax proposals, the KCCI called for setting the VAT rate at 0% for commercial importers, emphasizing the need for uniformity in tax treatment and addressing long-standing disparities in the current taxation framework.
According to the KCCI, while maintaining the standard Sales Tax rate at 18%, reducing the VAT on commercial importers from 3% to 0% will create a level playing field across all sectors. The chamber highlighted that, at present, only 90% of Sales Tax is adjustable at the point of sale, resulting in a cash flow crunch and financial burden for manufacturers and downstream industries.
The KCCI also criticized the inconsistency in VAT application. While industrial importers remain exempt from the 3% VAT, commercial importers are forced to bear this additional cost, leading to distortions in trade practices and opportunities for exploitation under non-uniform tax laws. The chamber listed a wide range of HS codes covering textile and synthetic fiber products to underscore the impact on critical imports.
The economic implications of retaining the 3% VAT were laid out by KCCI as follows:
• Increased Tax Burden: The limited Sales Tax adjustment continues to strain the financial health of key sectors, including textiles.
• Higher Consumer Prices: Retaining VAT leads to inflated prices of fabric and related goods, affecting affordability for end-users.
• Slow Industrial Growth: Persistent financial pressure stifles expansion in the textile and allied sectors.
• Job Reductions: Elevated taxes discourage investment and may trigger job losses.
• Unfair Trade Conditions: Disparate tax policies distort market competition and hinder fair trade practices.
The KCCI argued that the Federal Board of Revenue (FBR) had earlier promised either full Sales Tax adjustment or exemption from Section 8B for commercial importers—a commitment yet to be honored. Removing VAT, the chamber stressed, would offer financial relief, enhance liquidity, support SMEs, and help stabilize prices in the local market. It would also align taxation with actual trade margins, which often range between just 2% to 5%.
The KCCI concluded that implementing this tax reform would strengthen policy consistency, promote industrial competitiveness, and drive inclusive economic growth.