Withholding tax on raw material imports to be reduced by 2.5pc


The National Assembly Standing Committee on Finance, Revenue and Privatisation, during a recent meeting has conceded to a proposal to grant 2.5pc concession on withholding tax on import of raw materials. The initiative has been taken to encourage manufacturing activities in the country, industry sources revealed.

Member parliamentarians, representatives of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and officials of the Federal Board of Revenue (FBR) attended the meeting.

Shakeel Dhingrah, chairman of the FPCCI standing committee on FBR, told the National Assembly (NA) body that the government had agreed to provide relief to the industry, realising the importance of manufacturing activities for economic growth. Dhingrah further stated that the rate reduction would curb the malpractices as higher rate on commercial importers results in corruption.

Currently, the FBR categorised industrial and commercial importers for the purpose of levying taxes. The commercial importers are eligible to import everything under import policy. However, the industrial importers are restricted to import only those things that are required for manufacturing. The industrial importers have been allowed to import raw materials at reduced tax rates.

It was agreed that industrial imports would be subject to two percent withholding tax and they do not need an exemption certificate. Industrial importers are also required to pay 1.5 percent minimum tax on their turnover.  The business community argued that the commercial importers are also importing various goods ultimately used for manufacturing purpose.

Dhingra said the implementation of reduced rate is subject to an approval from the parliament.  He further said that the reduced rate of withholding tax would only be available to commercial importers in case of importing raw materials falling under Chapter 25 – 55 of the Pakistan Customs Tariff. On all other imports, the withholding tax will continue to be 6.5 pc.