Importers express concern over income tax rate

Official says FBR committee had allowed paying 2% tax on imported raw material

Commercial importers have voiced concern over non-implementation of 2% income tax on imported raw material for the local industries.

In a statement on Thursday, Pakistan Chemicals and Dyes Merchants’ Association (PCDMA) Chairman Mirza Nadeem Baig expressed worry over non-execution of Federal Board of Revenue (FBR) budget anomalies committee’s decision pertaining to 2% income tax.

The committee had directed the government to allow commercial importers to pay 2% income tax on imported raw material and also requested the FBR chairman to implement the recommendation immediately. It also directed FBR to include raw materials of chemicals and dyes in part 2 (raw material) of Income Tax Act instead of part 3 (finished goods) to shield commercial importers from hefty financial losses.

Baig added that in federal budget 2020-21, a massive chunk of chemicals and dye raw material was added to part 3 (finished goods) of Income Tax Act from part 2 (raw material) hence tax rate on it rose from 2% to 5.5%, which significantly hiked the cost of doing business.

“After the efforts made by the industry, FBR issued a notification which stated that the matter of inclusion of the raw material of chemicals and dyes from part 2 (raw material) to part 3 (finished goods) had been handed over to the budget anomalies committee,” he said.

According to Baig, the notification also added that until the committee gave final decision, commercial importers would have to pay 2% income tax instead of 5.5% while under section 81, a pay order of 3.5% had to be submitted which would be returned after the decision.

The pay orders is not supposed to be encashed, he said. “More than two months have elapsed now but still implementation of the order pertaining to 2% income tax on raw materials of chemicals and dyes has not been ensured,” he said. “Due to non-implementation, the import cost has hiked significantly and it is becoming difficult for commercial importers to continue running their businesses given the difficult economic situation.”

The supply of raw material to export oriented industries, especially the textile industry and small and medium enterprises may also be affected, he said. Baig requested the FBR chairman to help Covid-affected trade and industry to recover and formulate a policy, which would facilitate the industry rather than make it more difficult for it to do business.

Published in The Express Tribune, October 9^th, 2020.

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