Karachi, May 4, 2025 – Tea importers have urged the government and tax authorities to urgently review the current minimum retail price (MRP) mechanism applied to tea, warning that the existing framework is distorting the market, undermining legal trade, and facilitating widespread tax evasion.
In its formal budget recommendations for the upcoming Finance Bill 2025–26, the Pakistan Tea Association (PTA) highlighted several critical issues impacting the tea sector. The association stated that over 71,000 metric tons of tea were imported duty-free under concessions granted to the tribal regions of FATA and PATA—areas with a combined population of just 4 million people. Based on the national per capita consumption rate of 1.2 kg per year, actual regional demand should not exceed 4,800 metric tons.
The PTA, representing tea importers, warned that this discrepancy has allowed unscrupulous elements to exploit the tax-free regime, flooding the market with untaxed tea and forcing legitimate importers out of competition. “This abuse is weakening the formal sector, costing the national exchequer billions, and threatening the viability of registered tea importers,” said PTA Chairman Muhammad Altaf.
One of the key concerns raised was the arbitrary enforcement of SRO 1735(1)/2024, which mandates the application of sales tax on tea using a fixed MRP of Rs1,200 per kg, regardless of the actual import value or the form in which tea is brought into the country. “This blanket valuation ignores the diverse nature of tea imports—some of which arrive in bulk quantities exceeding 75 kg per bag and are later blended, processed, and repackaged,” Altaf said.
He added that tea importers source tea at prices ranging from under $1 per kg to more than $3 per kg, yet all varieties are taxed uniformly. “Such a mechanism lacks fairness and punishes lower-income consumers while disregarding the actual trade realities faced by legal tea importers,” he stressed.
The PTA has called for the removal of the MRP clause and proposed several reforms, including tariff rationalisation and stricter controls at dry ports. These include reducing customs duty from 11% to 5%, eliminating regulatory duty, and cutting sales tax and withholding tax significantly. It also recommended limiting re-exports under the Export Facilitation Scheme (EFS) and ensuring PTA’s oversight in verification of tea consignments.
With these reforms, tea importers estimate that legal imports could soar to 300 million kilograms annually, boosting tax revenues from the current Rs68 billion to an estimated Rs108.9 billion, ensuring a more equitable and transparent tea trade ecosystem.