Tea importers are forced to switch over to tea blending and packaging in the wake of easy access to smuggled tea at minimised rates, depicting government's failure to curb tea smuggling under the guise of Afghan Transit Trade (ATT), sources told Business Recorder.
Informed sources said black tea varieties worth $300 million was smuggled into Pakistan during last year's ATT that inflicted a huge revenue loss on the national exchequer, forcing the market players to change the mode of their business. "I have introduced my own brand of black tea in market due to lack of profitability in importing tea from Kenya," an importer-turned-tea packager told this correspondent. Sources said that new tea blenders and packagers have opted to sell their products in interior Sindh and Punjab, KPK and Balochistan, where established tea brands usually did not give much attention for promoting their business.
Sources said country suffers a revenue loss to the tune of about Rs 10 billion, last year, due to illegal trade of black tea via ATT. " Smuggled tea constitutes 50 percent total consumption in country," blenders and importers said. According to sources in Pakistan Tea Association (PTA), country's estimated total consumption stands at around $610 million as of calendar year 2013.
Traders accused government for heavy influx of undocumented sector, saying the government's move to charge standard rate of sales tax on legal tea imports has given significant rise to smuggling of black varities in to Pakistan through ATT. Market sources said that political instability in Egypt and civil war in Syria have pulled down tea import by crisis-hit Arab republics, resulting in a sharp fall of the commodity's auction rates at global markets. Increase in sales tax, they opined, has encouraged the undocumented sector to saturate the local markets, incurring losses to the national exchequer.
"Presently, we have been paying Rs 1.8 to 1.9 million duty on the import of 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 the head of taxes," tea importers said.
Importers and blenders have asked the government to enforce quantitative restriction of 15,000 ton on "Green and Black Tea" imported through ATT. In Afghanistan mainly Green Tea is consumed, therefore, this quantitative restriction would be more than sufficient for them. "Tea should be a zero rated item from Sales Tax Regime at least for one year in order to discourage smuggling and protect government's revenue," they added.