KARACHI: Tea importers have issued a strong call to the federal government to urgently reform the tea import taxation regime, warning that existing loopholes— particularly through FATA/ PATA exemptions and the imposition of Minimum Retail Price (MRP) at the import stage— are causing massive distortions in the formal trade and up to Rs40 billion in annual revenue loss.
In its budget proposals for the Finance Bill 2025–26, the Pakistan Tea Association (PTA) said over 71,000 metric tons of tea were imported under tax-free status granted to FATA/ PATA, despite the region having only 4 million people. This volume, the association noted, is 1,000 times greater than the actual demand based on per capita tea consumption of 1.2 kg per year.
This exploitation is destroying the formal market, eroding tax revenues, and pushing legal importers out of business, the association warned. “We urge the government not to extend the exemption of tea under FATA/PATA in the best national interest,” it said, emphasising that a cap of 4 million kilograms annually should be imposed to reflect actual population-based needs.
PTA Chairman Muhammad Altaf strongly criticised the enforcement of SRO 1735(1)/ 2024, which imposed sales tax on tea at an arbitrary MRP of Rs1,200 per kg—regardless of actual import prices or form of the product. MRP is a tax anomaly and warrants immediate attention, he said. “Bulk tea is imported in large quantities— often in bags over 75 kg— and undergoes blending, processing, and packaging. Charging MRP-based sales tax at the import stage ignores this reality.”
He added that tea is imported at widely varying prices— from below $1 per kg to over $3 per kg— yet the same Rs1,200 per kg valuation is being applied across the board. “There is no distinction in taxation based on actual import value. How can low-income consumers be taxed at the same rate as high-income ones, when tea is a daily staple across all social classes,” he asked, suggesting to address misuse and restore parity in the tea trade.
PTA also recommended withdrawal of the MRP clause, abolition of export re-exports under the Export Facilitation Scheme (EFS), enhanced oversight at dry ports, with PTA involved in verifying imports, tariff rationalisation to reduce tax evasion incentives. It suggested customs duty from 11% to 5%; regulatory duty from 2% to 0%; sales tax from 18% to 10%, and withholding Tax from 5.5% to 2%
The PTA estimates that with rationalised tariffs and elimination of misuse, legal imports could rise to 300 million kilograms annually, increasing tax revenues to Rs108.9 billion, compared to Rs68 billion currently.
Copyright Business Recorder, 2025
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