Business Recorder
ISLAMABAD: Pakistan’s polypropylene (PP) industry has raised serious concerns over what it called discriminatory taxation, unchecked commercial imports, and widespread tax evasion, warning that these issues are undermining the sector’s growth and documentation. According to an industry analysis, the polypropylene sector has a total installed capacity of around 5 billion bags annually, with estimated production of 325,000 metric tons per year and more than 100 manufacturers operating across the country. The industry supplies packaging material to key sectors including cement, fertiliser, textiles, food, and agriculture. Despite its scale, the sector claims it is operating at a disadvantage due to uneven tax regime. The analysis highlights that industrial importers face higher withholding taxes compared to commercial importers, who enjoy exemptions. Minimum tax under Section 148 stands at 2 percent for industry players versus 3 percent for commercial importers, while withholding tax under Section 153 is 5 percent for industry but exempt for commercial traders. This disparity has encouraged a surge in commercial imports, putting local manufacturers under pressure. In a letter to the government, Pakistan Polypropylene Woven Sack Manufacturers Association (PPWSMA) said that the effective tax rate on the polypropylene industry reaches as high as 79 percent, based on a 10 percent net profit margin, while average withholding tax on sales is estimated at 7.9 percent. Industry stakeholders argue that such a heavy tax burden leads to liquidity issues due to accumulated refunds. Also read: PPWSMA urges FBR to implement FTO’s recommendations The report also flags significant tax evasion concerns linked to commercial imports of polypropylene raw materials. These include practices such as flying invoices, undeclared downstream production, and evasion of sales and income taxes through undocumented manufacturing and supply chains. Historically, a differential sales tax regime existed, with higher input tax and lower tax on finished goods, but it was withdrawn in 2013 under pressure from commercial importers. The industry now advocates for its reintroduction to restore balance. “To address these challenges, the sector has proposed a series of policy measures, including mandatory track and trace registration for all manufacturers, printing of NTN or track-and-trace numbers on polypropylene bags, and confiscation of unregistered products. It has also called for the imposition of regulatory duties and a minimum value addition tax of 7 percent, bringing total taxation on commercial imports to 25 percent,” said Chairman PPWSMA Iskandar Khan in his letter. The industry has recommended improvements in tax governance, such as automated tax exemption certificates, faster refund processing, and the establishment of an audit oversight body comprising senior tax officials and professionals. Stakeholders believe these measures would help document the economy, curb the production and sale of undeclared polypropylene bags, and enhance tax revenue by plugging leakages across the supply chain. The report concludes that without urgent policy intervention, the imbalance between industrial manufacturers and commercial importers will continue to fuel informality and erode the competitiveness of the domestic polypropylene industry. Copyright Business Recorder, 2026
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