Karachi, February 15, 2024 – The Karachi Chamber of Commerce and Industry (KCCI) has called on the authorities to abolish tax exemptions granted to Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA).
In a statement released on Thursday, Senior Vice President Altaf A. Ghaffar of the KCCI urged the Federal Board of Revenue (FBR) to address the widespread misuse of tax exemptions in these regions, which has led to significant revenue losses and impacted the commercial importers of Black Tea.
Ghaffar highlighted the misuse of tax exemptions granted to Azad Kashmir, as well as FATA/PATA, expressing concerns about the revenue implications and the adverse effects on businesses dealing with Black Tea imports. He pointed out that while commercial importers of Black Tea faced high tax rates, those from Azad Kashmir and FATA/PATA regions paid considerably lower rates, resulting in a substantial shift of import volume to these exempted areas.
The Senior Vice President noted that the total incidence of taxes and duties on the commercial import of Black Tea was a staggering 53 percent, compared to the 15 to 19 percent paid by importers from Azad Kashmir and FATA/PATA. This significant difference has led to around 75 percent of Black Tea imports being diverted to exempted areas, impacting the revenue collection by the FBR and adversely affecting legitimate importers nationwide.
Ghaffar emphasized the disparity in tax payments, revealing that importers of Black Tea were burdened with taxes and duties amounting to Rs6.21 million per container, whereas those from Azad Kashmir and FATA/PATA paid only Rs1.65 million. This stark contrast places an additional financial burden of Rs4.56 million on non-exempted importers for a 20-feet container, and this difference doubles for a 40-feet container.
Expressing concern over the injustice faced by legitimate Black Tea importers, Ghaffar highlighted the impact on businesses, noting a sharp decline over the past few years. He emphasized that Black Tea imported under tax exemptions meant for specific regions was being widely sold throughout Pakistan, leading to a severe decline in revenue for legitimate importers who contribute approximately Rs3.5 billion annually.
Furthermore, Ghaffar drew attention to the creation of anomalies in tax regimes, differentiating between commercial and industrial importers of Black Tea. He argued that Black Tea is a finished and consumable commodity without further processing, making the imposition of different rates of Withholding Tax, Customs Duty, and Sales Tax/VAT unjustifiable.
In light of these grievances, the KCCI demanded the discontinuation of tax exemptions granted to Azad Kashmir and FATA/PATA by the end of the current fiscal year. Ghaffar stressed that no further extensions should be granted after June 2024, aiming to create a level playing field for Black Tea importers and ensuring fair competition in the local markets. The KCCI’s call for action seeks to address revenue concerns, rectify market imbalances, and foster a more equitable business environment for all stakeholders.
