KARACHI: President Karachi Chamber of Commerce & Industry (KCCI) Muhammad Jawed Bilwani, in response to concerns expressed by the Pakistan Tea Association (PTA) over fixation of Minimum Retail Price (MRP) of Rs1200 per kg flat rate on the import of black tea in bulk for further sales tax and withholding tax, urged the government to withdraw this unjust regulation immediately, stating that this measure would not only penalise legitimate importers by forcing them to pay higher taxes but also make tea expensive, particularly for the poor segment of society.
“Setting the MRP at a flat rate per kilogram will disproportionately impact the lowest income groups in both urban and rural areas, equating their burden to that of higher-income groups,” he warned.
“This move will place an additional strain on lower and lower-middle-class households, who are already grappling with the severe effects of rising inflation on essential commodities,” he added while exchanging views with members of PTA delegation during their visit to the Karachi Chamber of Commerce & Industry (KCCI).
Chairman PTA Muhammad Altaf, Vice President KCCI Faisal Khalil Ahmed, Chairman KCCI’s Federal Taxation Subcommittee Abu Bakar Shamsi, Valuation Chairman PTA Salim Amanullah, Executive Committee Members PTA Sohail Anwer, Abdullah Qadir Qudia, and Abdul Basit Abdul Razzak along with KCCI Managing Committee Members were also present at the meeting.
Bilwani suggested that instead of applying a flat rate to all types of imported tea, a more thoughtful approach should be adopted. Fixing the MRP at Rs1200 per kg would lead to a higher evaluation of sales tax even for tea imported at a meagre cost of 0.80 cents per kg, which would significantly increase the cost for the least expensive tea and make it unaffordable for consumers, he said, adding that black tea was being imported at a cost ranging from 0.80 cents to US$4.5 per kg.
He said, “On one hand, this measure intensifies hardships for legitimate importers, and on the other, exemptions are given to FATA/ PATA while the dry port facilities are also grossly being misused for tax evasion which requires special attention so that a level playing field could be ensured to legitimate tea importers who have been supplying this essential household product since several decades and have been contributing huge amount of taxes to the national exchequer.”
“It is a matter of grave concern that during 2023-24, 23 million kilograms of tea arrived under FATA/ PATA exemption which ended up landing in markets across Pakistan,” he said, adding that tea imported under FATA/ PATA exemptions is 500 percent higher than the consumption in these areas which means that around 20 million kilograms of tea from these areas was sent to rest of Pakistan through other channels, resulting in depriving the national exchequer of Rs25 billion annually.
Speaking on the occasion, Chairman PTA Muhammad Altaf, while referring to the recent enforcement of Rs1200/- per kg MRP for black tea, stated that PTA disagrees with FBR’s decision to announce MRP as there was no rationale in it and it disregards the nature of tea trade in addition to oversimplifying the market.
“Tea is usually imported in bulk from 5 kilograms to 80 kilograms per bag which undergoes further process in terms of blending, mixing, packing; etc., before reaching end-consumers through commercial importers or manufacturers,” said Chairman PTA.
Under Serial No. 14 of the Third Schedule of the Sales Tax Act 1990, an 18 percent is being applied on imported tea. It is a well-known fact that black tea is imported for blending, mixing, and packaging; hence, it should be treated as raw material and sales tax should accordingly be based on the import value as per Subsection 46 (f) of Section 2 of the Sales Tax Act 1990 rather than the Minimum Retail Price which will have an adverse impact of Rs150 to Rs300 per kg on imported tea prices.
Seeking KCCI’s help in dealing with this matter, he said that if this trend continues, PTA fears that a substantial portion of the revenue will be lost by the end of the current financial year. “We hope that prompt attention will be given to this matter to mitigate the potential losses not only to tea traders but also to the national kitty,” he added.
Copyright Business Recorder, 2024
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