KARACHI: The Pakistan Chemicals & Dyes Association (PCDMA) has urged the Federal Board of Revenue (FBR) to reduce the compliance burden on businesses, cut the General Sales Tax (GST) rate and restore protections for importers in its proposals for the federal budget 2026-27.
PCDMA Chairperson Salim Valimuhammad warned that mounting compliance requirements and aggressive audit practices were steadily pushing taxpayers towards the informal economy.“People generally want to pay taxes, but due to limited awareness and technical expertise, they make honest mistakes, and the FBR takes advantage of that,” he said, adding that tax officials should guide taxpayers rather than issue harsh notices.
“Taxpayers generally want to comply with tax laws, but complicated procedures and a lack of guidance often result in genuine mistakes,” Valimuhammad said. He added that the FBR should adopt a more facilitative and educational approach instead of relying primarily on notices and enforcement measures.
Among the association’s key recommendations is a reduction in the GST rate from 18 per cent to 16 per cent, followed by a gradual transition to a single-digit rate. Valimuhammad argued that lower tax rates would improve compliance, broaden the tax base and ultimately increase government revenues.
The PCDMA chairperson also called for the restoration of the final tax regime (FTR) for commercial importers and the reinstatement of audit exemptions previously linked to the payment of additional sales tax. He said the withdrawal of these protections had increased uncertainty and compliance costs for importers.
To ease liquidity constraints faced by traders and wholesalers, the association proposed restoring Section 8B facilities for commercial importers. As an interim measure, it suggested allowing businesses to adjust up to 95 per cent of output tax against input tax, with only 5.0 per cent payable in cash.
Highlighting concerns over fake invoicing, Valimuhammad recommended reducing the further tax rate from 4.0 per cent to 1.0 per cent, arguing that a lower rate would encourage compliance and reduce incentives for fraudulent practices.
On income tax, the association proposed lowering withholding tax on local supplies of raw materials from the current rates of 5.0 per cent and 5.5 per cent to 2.0 per cent and 2.5 per cent, respectively. He maintained that lower withholding taxes would encourage businesses to remain within the documented economy.
The association also objected to what it described as unequal tax treatment between commercial and industrial importers under Section 148 of the Income Tax Ordinance. Valimuhammad said identical imports should be taxed uniformly, regardless of whether they are imported by traders or manufacturers.
Among its customs-related proposals, the PCDMA called for the abolition of the Rs500 WeBOC token fee on goods declarations, arguing that importers were effectively paying duplicate charges following the introduction of the Pakistan Single Window (PSW) system.
The association also sought the restoration of NTN-based self-clearance facilities for commercial importers, saying the withdrawal of the facility had led to delays and increased administrative bottlenecks at customs offices.
In addition, the PCDMA recommended discontinuing the Export Facilitation Scheme (EFS), arguing that it was vulnerable to misuse and revenue leakage. Instead, it urged the government to strengthen and expedite the tax refund system to support genuine exporters.
The proposals have been submitted to the FBR and are expected to be discussed during pre-budget consultations with trade and industry stakeholders ahead of the announcement of the federal budget.
