The prices of high-grown varieties of black tea have registered eight to 10 percent increase in local market despite the government’s move to reduce sales tax on tea to 5 percent from the standard rate of 16 percent. The increase in the prices of these varieties ranges between Rs 30 per kg to Rs 65 per kg in the local market, Business Recorder has learnt here on Tuesday.
“The government’s decision to reduce sales tax on tea import is aimed at scaling down smuggling of black tea,” tea brand manufacturers said. Pakistan imports three varieties of high-grown tea including “Danedar” (BP-1), Leaf (PF-1) and Dust (D-1), being sold in wholesale and retail markets.
“Government reduced sales taxes on tea import to discourage smuggling of tea into the country and improve legal imports but interestingly the prices of tea increased manifold during last five months despite the reduction in sales tax rate,” said packers and blenders.
Industry sources said though illegal tea imports via Afgan Transit Trade (ATT) have reduced to a certain extent due to strict measures taken by the government but the impact of sales tax reduction on tea could not be witnessed at retail markets and wholesale markets. On the other hand, Pakistan Tea Association (PTA) sources claimed that devaluation of rupee against the dollar and rising prices in Kenya have deterred packers and blenders to pass on the impact of the reduction in sales tax to consumers.
They claimed that Kenyan tea production was short by 27 million kgs in January to July this year due to dry weather conditions. Pakistan imports tea from over 20 countries but Kenyan share in overall imports is over 50 percent. Previously, the wholesale price of “Danedar” (BP-1) tea at wholesale market was Rs 475 per kg, which is now being sold at Rs 540 per kg while its retail price is Rs 560 per kg.
Similarly, the price of Leaf (PF-1) tea also soared by Rs 50 per kg. Now, this tea variety is being sold at Rs 560/kg in retail markets against its previous price of Rs 520/kg. The wholesale price of same variety was 495/kg, which has soared by Rs 20/kg.
The other variety of high-grown tea, Dust (D-1), has now fell short in wholesale and retail markets and its price also increased by Rs 20 and Rs 30 in retail and wholesale markets, respectively.
The price of Rwandan tea, which is a major contributor in the country’s tea blending industry, also showed a rising trend in wholesale market, increasing by Rs 40 per kg. The high-grown tea varieties are considered “best” among all tea varieties, perfectly rounded teas with a bright and strong taste, which are usually cultivated at an elevation above 1200 meter.