KCCI, PTA call for action on tea import anomalies

Say tax exemption misuse, unfair duties threaten tea industry’s viability

KARACHI:

The Karachi Chamber of Commerce and Industry (KCCI) and the Pakistan Tea Association (PTA) have demanded that the government put an end to the misuse of tax exemptions and address other anomalies in tea imports.

KCCI, Senior Vice President, Altaf A Ghaffar urged the Federal Board of Revenue, in a statement released on Thursday, to take notice of the widespread misuse of tax exemptions in Azad Kashmir and the Federally Administered Tribal Areas/Provincially Administered Tribal Areas. This misuse has led to a substantial loss of revenue and is pushing commercial importers of black tea, a major revenue source, out of business, he said.

Ghaffar highlighted that commercial imports of black tea face exorbitant taxes and duties totalling 53%, while importers from Azad Kashmir and FATA/PATA regions pay only 15% to 19%. This imbalance has resulted in about 75% of black tea imports being diverted to exempted areas, far exceeding their actual consumption. Most of this tea is sold throughout Pakistan, depriving the FBR of significant revenue.

He also noted that importers of black tea pay taxes and duties of Rs6.21 million per container, whereas those in Azad Kashmir and FATA/PATA pay Rs1.65 million. This significant disparity unfairly burdens non-exempt importers across Pakistan, resulting in additional costs of Rs4.56 million extra per 20-foot container of black tea. Ghaffar stressed that legitimate importers of black tea have seen a sharp decline in business over the past few years due to these practices.

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He added that black tea, imported by Azad Kashmir and FATA/PATA regions with tax exemptions, was intended solely for sale within these areas. However, it’s being widely distributed nationwide, severely impacting the revenue of black tea importers, who generate Rs3.5 billion annually.

In addressing the issues faced by tea importers, KCCI’s Senior VP demanded that the tax exemptions granted be discontinued by the end of the current fiscal year, with no further extensions granted after June 2024. This move would provide a level playing field, he said.

Speaking to The Express Tribune, Khalil Paracha, Senior Vice Chairman of the Pakistan Tea Association (PTA), stressed the need to halt the misuse of exempted duties and eliminate the Maximum Retail Price (MRP) duty imposed on tea imports. Paracha highlighted the anomaly of charging MRP duty at the finished product stage, while tea is imported in bulk. He expressed concerns on behalf of the entire industry, including importers, traders, and packers, calling for the removal of the MRP duty at all relevant forums, including the ministry, federation, and association.

Published in The Express Tribune, February 16^th, 2024.

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