Commercial importers seek end to tax gap with industrial imports

Commercial importers have urged the federal government to eliminate the tax differential between commercial and industrial imports of raw materials, arguing that the existing structure is encouraging tax avoidance and causing revenue losses.

Industry representatives said the higher tax burden on commercially imported raw materials compared to industrial imports had created distortions in the market.

According to importers, many goods are being imported in the name of industrial units and later sold in the open market, depriving the government of billions of rupees in tax revenue.

They said the overall tax differential currently stands at around 26-28%, making it commercially difficult for genuine importers to compete.

Importers claimed that businesses had increasingly started relying on informal arrangements to offset the gap and remain competitive in the domestic market.

They added that it had become common practice for goods to be imported under industrial units while private arrangements were made to pay an informal premium equivalent to nearly 25-30% of the tax difference.

According to industry representatives, the system was diverting revenue away from the documented economy, encouraging sales to unregistered buyers and weakening the formal supply chain.

The Federation of Pakistan Chambers of Commerce and Industry has also raised the issue in its budget proposals submitted to the government, calling for removal of the differential.

Commercial importers said they mainly import raw materials and intermediate goods for industrial use rather than finished products and supply these goods to manufacturing units.

They argued that many small and medium-sized industries were unable to directly import large quantities of raw materials and therefore depended on commercial importers.

The importers proposed two options to the government: complete removal of the tax differential between commercial and industrial imports or reducing the gap to a maximum of 2-3%.

They said rationalising tax rates on commercial imports could increase documented imports, discourage informal practices and improve tax revenue collection.

Industry representatives further claimed that the commercial import bill could potentially double if the market was brought into the documented economy through tax reforms.