Business Recorder
KARACHI: Commercial importers have called on the federal government to end the tax gap between commercial and industrial imports of raw materials, saying the disparity is driving tax avoidance, distorting the market, and leading to substantial losses in revenue for the national exchequer. Industry sources said that current tax differential, ranging between 26-28 percent total impact in comparison, is not commercially viable for genuine commercial importers. As a result, some of the importers are increasingly resorting to informal arrangements to remain competitive in the domestic market, of which the other commercial importers are unable to compete in the market. All major trade bodies have serious reservations on this issue and also taken up in their budget proposals for the next fiscal year submitted to the federal government, calling for the complete removal of the existing tax differential between commercial and industrial imports of raw material. Importers have proposed two options to the government. The first is the complete elimination of the tax differential between commercial and industrial imports of raw materials. Alternatively, they suggested narrowing the gap by reducing taxes on commercial imports and capping the differential at 2 to 3 percent. According to industry representatives, the commercial import bill could potentially double if tax rates are rationalized and the market is brought into the formal economy, ultimately leading to higher tax revenue collection. They further claimed that such reforms, particularly by lowering the tax burden on commercial imports, would significantly boost documented imports, discourage risky informal practices, and channel billions of rupees in additional tax revenue directly into the national exchequer. They said that higher tax burden on commercially imported raw materials, compared to industrial imports, has created significant market distortions. They added that a wide range of goods are being cleared under industrial import categories and later diverted to the open market, resulting in substantial revenue losses for the government. According to them, this practice is largely driven by the sizeable tax differential between commercial and industrial import channels. Industry sources said it has increasingly become common practice for goods to be imported under the names of industrial importers. They added that, in such cases, an informal premium estimated at around 25-30 percent of the tax differential is reportedly settled through private arrangements. They warned that this informal system shifts revenue benefits away from the government and into undocumented channels. Copyright Business Recorder, 2026
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