KARACHI: The Pakistan Chemicals and Dyes Merchants Association (PCDMA) has expressed concern over the federal government’s decision to allow manufacturers to sell up to 50 per cent of imported raw materials in the local market without value addition, arguing that the measure effectively legitimises the misuse of export-related incentives.
PCDMA Chairperson Salim Valimuhammad said raw materials imported under concessionary tax and duty schemes intended exclusively for export-oriented production should not be allowed to enter the domestic market under any circumstances.
He said the provision, introduced through amendments to the Sales Tax Act in the federal budget, permitting manufacturers to sell up to 50 per cent of imported raw materials without processing, contradicts the objective of export facilitation. Rather than curbing abuse, it provides legal cover for the diversion of concessionary imports into the local market, undermining commercial importers that pay the full range of applicable taxes, duties and levies.
“Raw materials imported under export incentive schemes must be used solely for value addition and subsequent exports. Allowing even 50 per cent of such imports to be sold domestically defeats the purpose of these incentives and creates an uneven playing field,” Valimuhammad said.
He argued that the issue was not the percentage permitted for resale but the principle itself.“There should be no permission whatsoever to sell concessionary imported raw materials in the local market. If imports are allowed under special incentives for export production, they must be utilised exclusively for that purpose,” he added.
The PCDMA chairperson urged the government to replace the 50 per cent resale limit with a complete ban on the domestic sale of concessionary imported raw materials and called on the Federal Board of Revenue (FBR) to take action against those misusing industrial concessions under the guise of manufacturing.
Valimuhammad said the long-standing disparity in the tax treatment of commercial importers and industrial manufacturers had distorted competition in Pakistan’s chemicals and dyes sector. While commercial importers supplying raw materials to small and medium-sized enterprises (SMEs) are required to pay higher withholding tax and sales tax at the import stage, some industrial units continue to benefit from concessionary imports and subsequently divert part of those consignments into the domestic market without value addition.
“This practice not only harms tax-compliant commercial importers but also deprives the national exchequer of legitimate revenue while weakening market discipline,” he said.Rejecting the argument that the newly introduced 50 per cent cap would resolve the issue, Valimuhammad said meaningful reform could only be achieved through a uniform import tax regime applicable to all importers. Such a system, he said, would eliminate tax distortions, ensure a level playing field, strengthen supply chains for SMEs and promote fair competition in the chemicals and dyes market.
He called on the federal government and the FBR to implement comprehensive reforms, including uniform taxation at the import stage, stricter enforcement against the misuse of industrial concessions and stronger regulatory oversight to protect the interests of the trading community and support the country’s documented economy.
