Tea importers cry foul over tax exemptions for Azad Kashmir and tribal areas

KARACHI: The Karachi Chamber of Commerce & Industry (KCCI) has called on the Federal Board of Revenue (FBR) to crack down on the rampant abuse of tax and duty exemptions granted to Azad Kashmir and the tribal areas of FATA and PATA, which they say are hurting the legitimate tea importers and causing a huge loss of revenue to the government.

Altaf A. Ghaffar, senior vice president of KCCI, said that the commercial import of black tea was subject to a whopping 53 percent of taxes and duties, while the importers from Azad Kashmir and FATA/PATA paid only 15 to 19 percent, resulting in a massive shift of imports to the exempted areas, which far exceeded their actual consumption.

"This discriminatory tax regime is an obvious anomaly and also a loss to the exchequer," Ghaffar said in a statement. He said that most of the tea imported by Azad Kashmir and FATA/PATA was sold to customers all over Pakistan, depriving the FBR of a major chunk of revenue.

Ghaffar said the importers of black tea paid Rs6.21 million of taxes and duties per container, while the Azad Kashmir and FATA/PATA importers paid only Rs1.65 million, which meant that the non-exempted importers were paying Rs4.56 million extra for a 20-feet container and double that amount for a 40-feet container.

"It is a sheer injustice being done to the legitimate importers of black tea, whose businesses have declined sharply over the last few years," Ghaffar said, adding that the black tea imported by Azad Kashmir and FATA/PATA with tax and duty exemptions was supposed to be sold only within those regions, but it was widely distributed all over Pakistan, affecting the businesses of the tea importers who generated revenue of Rs3.5 billion annually.

“Furthermore, anomalies have also been created under pressure of the large-scale processors/packers of Black Tea and different tax regimes have been created for commercial and industrial importers. In principle, the black tea in itself is a finished commodity and consumable without further processing. Both Commercial importers and industrial packers sell black tea without any change in form, hence it is not justifiable to charge different rates of Withholding Tax, Customs Duty and Sales Tax/ Value-Added Tax VAT etc.

This discriminatory tax regime is an obvious anomaly and also a loss to the exchequer.” He demanded that the tax exemption granted to Azad Kashmir and FATA/PATA be discontinued by the end of the current fiscal year and no further extension be given after June 2024, which would provide a level playing field to the black tea importers and enable them to compete in the local markets.