Tea traders are learnt to have urged the government to exempt sales tax on the import of black tea in the new budget to curb the commodity’s smuggling. Pakistan Tea Association (PTA) submitted a set of proposals to the government for incorporation in the new budget document, which proposed to the federal government to enforce a quantitative restriction on the import of tea via Afghan Transit Trade.
They insisted that 15,000 ton of ‘Green and Black Tea’ was being imported through Afghan Transit Trade (ATT), saying that green tea was the foremost beverage served in Afghanistan. “Therefore, a quantitative restriction will be more than sufficient for them”. Members of the tea association also advised the federal finance minister to levy and collect the same amount of CD/ST/IT from Afghan importers at entry point in Karachi and passing it on to Afghan government. “This practice is in vogue in various landlocked countries.”
In a letter sent to the prime minister, federal finance minister and FBR, tea traders called for declaring tea a zero-rated item, freeing it from the Sales Tax regime for at least a year to discourage smuggling and protect government revenue. The letter said that as much as 240,000 tons of tea was consumed in Pakistan, more than half of which was smuggled into the country via the Afghan Transit Trade.
This practice, they said, was being encouraged because of “poor physical controls by customs and substantial high incentive to evade import duty and Sales Tax”. Chairman of Pakistan Tea Association Hamid S Khwaja toldBusiness Recorder that the outgoing government in the last budget in June last year had reduced Sales Tax from 16 percent to 5 percent, besides imposing stiffer checks and control. “Undoubtedly third was a courageous decision on government’s part and needed to (be) implemented for an adequate period to achieve positive results.”
Surprisingly, he said, just after eight months, the government reversed its decision arbitrarily without consulting the association or major blenders on February 28 this year. He said that the sales tax on tea imports was increased from 5 percent back to 16 percent “without realising the consequences”.
Khwaja said: “Such quick fixes will further deteriorate the national economy,” adding that such hasty decisions would encourage smuggling and “further ruin the (domestic) tea industry”. He said that subsequent to the government decision, tea prices had gone up, badly hitting consumers’ interests. He said that leakages in tea trade had almost brought the legitimate commercial trade to a halt.
He said that the government had tried various methods to curb smuggling, adding that there was a need to create a level playing field for the formal, enabling it to compete with the informal one, besides broadening the tax net. “Monitoring trucks using electronic gadgets, electronically linking Afghan and Pakistani customs and deploying additional anti-smuggling staff are among key measures to curb tea smuggling via the Afghan Transit Trade, but none (of the above steps) yielded any positive results,” tea importers maintained. Hamid Khwaja said that PTA was announcing its unequivocal support to the new government and requesting it to take the above mentioned “rational steps” to stop illegal imports and help save the tea industry from certain doom.