RECORDER REPORT

KARACHI: Commercial importers have threatened country-wide protest against abolition of final tax regime (FTR) and increasing tax burden.

Chairman of Pakistan Chemicals and Dyers Merchant Association (PCDMA), M Arif Lakhani said at a meeting that earlier the commercial importers were treated under final tax regime and they were allowed audit exemption on the payment of 6 percent withholding tax. He lamented that said regime is replaced with minimum tax in the budget and further proposed reassessment of raw material and opening of audit cases of commercial importers was problematic for them. He said new proposals were tantamount to injustice to commercial importers and the same would not be acceptable.

He sought the help of Karachi Chamber of Commerce and Industry to take up the issue of anomalies in federal budget 2018-19 with Prime Minster and federal finance minister to get them resolved.

He said commercial importers were importing raw material for various sectors, including textile. “Bringing commercial importers into minimum tax regime will increase the cost of raw material,” he said, adding that this would increase the cost of production for various sectors.

He appealed to the prime minister and the finance minister to continue the final tax regime for commercial importers and reduce the withholding tax rate to four percent from 6 percent. Further, the tax rate difference between commercial and non-commercial importers should be removed in order to provide level playing field.

Lakhani also pointed out increase in additional tax to three percent from two percent and said that such initiatives would promote flying invoices.            

The meeting participants noted that through an amendment in Section 148 of Income Tax Ordinance through Finance Bill 2018-19, an existing anomaly in Income Tax and Sales Tax structure on commercial importers of raw materials has been further compounded which would eliminate many importers out of business.

They pointed out that WHT of 4.5% to 6.0% paid on import of raw materials by commercial importers has been redefined as Minimum Tax and the importers have been taken out of Fixed Tax Regime (FTR).

They opined that the already high rate of WHT and Sales Tax at import stage create a wide disparity in total incidence of tax at 8% to 9% between Commercial Importers and Manufacturers whereas the amendment will further add to the said disparity.