The government's move to increase General Sales Tax (GST) from the standard rate of 16 percent to 17 percent will boost smuggling of tea and discourage legitimate trade, said tea market's leaders while sharing their thoughts over federal budget 2013-2014 here on Wednesday.
Chairman, Pakistan Tea Association (PTA), Hamid S Khawaja, told Business Recorder that the government's move to enhance sales tax would discourage the legitimate trade while smugglers will have golden chance to earn exorbitant profits through illegal trade. "We are waiting for Finance Bill but it is obvious that tea prices in local markets will go up by Rs 5 to 6 immediately," he said, adding that no concrete and effective measures have been taken to curb smuggling. He deplored that the government has further increased burden on the already taxed industry.
It is pertinent to mention here that PTA had proposed to exempt sales tax on the import of black tea in budget 2013-2014 to discourage illegal trade. He said that achieving revenue targets at the cost of smuggling and illegal practice was not understandable. "Such quick fixes will further deteriorate the country's economy. This will encourage smuggling and further ruin the tea industry and prices of tea will go up affecting the consumers adversely," he added.
He said that presently they were paying Rs 1.8 to 1.9 million duty on a import of a single container carrying black tea varieties but at the same time only Rs 0.8 to 0.9 million is paid per container on tea imported through ATT, thus creating a difference of Rs 0.8 to 0.9 million per container between legitimate and illegal trade in head of taxes.
Traders said that devaluation of Pak rupee against dollar had also give a significant rise to the profit margin on illegally traded black tea in the country's local markets for being cheap priced that continues to attract the traders. Industry sources said that traders would largely opt for purchasing the smuggled tea instead of going for the imported commodity for getting a sizeable profit on its sales. It will badly hit the importers, they added.
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