KARACHI: The Pakistan Chemicals & Dyes Merchants Association (PCDMA) has submitted budget proposals for the upcoming 2025–26 federal budget, urging the Federal Board of Revenue (FBR) to revive the Final Tax Regime (FTR) specifically for commercial importers. The association emphasized that restoring this system would provide much-needed relief, simplify taxation, and strengthen trust between the government and the business community.
PCDMA Chairman Salim Valimuhammad, in collaboration with the association’s budget committee led by Umair Tariq, stressed the growing compliance burden on taxpayers. He argued that frequent audits, excessive documentation, and complex tax procedures discourage formal economic participation. The association stated that many importers are willing to comply with tax laws but are often hindered by limited technical know-how and the uncooperative attitude of tax officials.
A core demand in the proposal is the reintroduction of FTR for commercial importers, especially since they are still subjected to Additional Sales Tax (Value Addition Tax) without enjoying the audit exemption that was previously linked to it. PCDMA maintains that either the audit immunity should be reinstated or the extra tax should be eliminated to maintain fairness for importers.
Another major concern raised by PCDMA is the unequal treatment between commercial and industrial importers under Section 148 of the Income Tax Ordinance. The association highlighted that industrial entities often misuse their status to import goods meant for local sale while benefiting from lower tax rates, creating an unfair environment for commercial importers. In light of this, PCDMA either demands tax parity or a return to the FTR for commercial entities.
PCDMA also raised concerns over the audits conducted under Section 165 related to withholding tax returns. As withholding agents already handle tax collection responsibilities, the additional pressure of audits creates unnecessary stress. The association proposed discontinuing these audits to ease the burden on businesses.
A significant issue outlined in the proposals was the difficulty families face in continuing businesses after the death of a sole proprietor. Under current laws, they are required to start the registration process from scratch. PCDMA recommended allowing a family member to be added as a representative in the deceased’s IRIS profile to ensure continuity of business operations.
“To combat the issue of fake invoices, the association proposed reducing the rate of Further Tax from 4% to 1%, making it easier for genuine businesses to comply. It also recommended a phased reduction in the general sales tax (GST) rate, starting with a cut to 16%, with the aim of reaching single-digit rates in the long run.”
Regarding local supplies, the association suggested lowering the withholding tax rate on raw materials to 2% for companies and 2.5% for individuals. This, they believe, would encourage more businesses to join the formal economy and improve documentation.
PCDMA also called for scrapping the Export Facilitation Scheme (EFS), citing its misuse and detrimental impact on legitimate importers. Instead, it urged enhancements in the regular refund system to aid genuine exporters. The association concluded by recommending capped customs duties of 5% on raw materials and streamlined tariff structures to combat under-invoicing and revenue losses.
Addressing structural challenges, the association proposed lowering withholding tax on raw material supplies and abolishing outdated fees like the Rs. 500 WeBOC token, which importers now redundantly pay alongside the PSW fee. To improve liquidity, PCDMA suggested restoring 95% adjustability of output tax under Section 8B.
PCDMA recommended capping customs duties on raw materials such as chemicals and dyes at 5%, arguing that the current higher rates—up to 20%—along with additional customs duties, are detrimental to business and must be eliminated.
Through these proposals, PCDMA aims to create a more balanced and supportive tax regime that fosters compliance, ensures equity, and drives economic growth.
