Retailers under threat from advance tax

The government has imposed 2.5% advance income tax on retailers through the Finance Bill 2024, which makes the whole fast moving consumer goods sector its “withholding agent”.

According to officials of different companies, a bigger problem arises when the FMCG sector and its distribution network sell products to retailers, 90% of whom are unregistered, and claims this tax. Retailers complain that it is not the prerogative of manufacturers and they will not pay any such income tax.

The government has very conveniently passed the buck and the onus of collecting taxes on to the manufacturers of consumer goods, instead of enforcing structural reforms to bring retailers to the tax net, they said.

Market insights from major cities such as Karachi and Lahore show that the retailers were returning approximately 30% of the consignments dispatched by unregistered retailers, in denial of the government’s recent measures. Some experts have underlined the urgent and immediate need for the government to actively communicate and enhance its outreach to explain the policy measure undertaken in the recent budget.