PTA budget proposals: Cut GST rate, abolish duty on black tea to curb smuggling

Reduction in the rate of GST and abolishment of Customs duty on black tea will help curb smuggling through Afghan transit trade, Pakistan Tea Association (PTA) said. If the government wants to stop tea smuggling, it should incorporate the Pakistan Tea Association's proposals in the budget for FY11-12.
PTA sources said the association has sent its recommendations to the federal government for saving the country's tea industry from collapse. These recommendations have been designed with the help of Karachi Chamber of Commerce and Industry (KCCI).
They said the government should take bold steps to bolster the tea industry in the country.
They said in general the Afghan people are only green tea drinkers instead of black tea. They said that Afghanistan's population is around 25 million and their (black tea) consumption estimated is around 10 to 12 million kgs annually, but Afghans bring in approximately 90 million kgs under ATTA. Sources said the remaining 78 to 80 million kgs black tea is smuggled into Pakistan, this figure of smuggling is increasing day-by-day, which was destroying the Pakistan's tea industry.
Pakistan's population is around 190 million and tea consumption is 190 to 200 million kgs. But, official Pakistan import figures only show between 105 to 110 million kgs, which is not equivalent to consumption in Pakistan.
While talking to Business Recorder Mohsin M Saify, Chairman Pakistan Tea Association said on Sunday Pakistan government should take fiscal measures to save the country's tea industry. They requested the government to abolish customs duty and reduce GST on tea. Its the cheapest available drink in Pakistan and should be considered as common mans drink.
They urged the government that it should adopt these recommendations otherwise the local tea industry would be destroyed in near future.
PTA budget recommendations:
-- Reduction in rate of GST for black tea to curb smuggling through Afghan transit trade.
-- Issue: Tea trade and industry in Pakistan is adversely impacted by smuggling and nearly half the tea consumed in Pakistan is now smuggled under the guise of ATTA.
Outcome:
-- Market size of "Tea Market" is approx 200,000 tons with a per capita consumption of just over 1.0 kg.
-- Approx 45-50 percent of tea is smuggled into the country under the guise of ATTA, Afghanistan with a population of only 25 million are predominantly green tea drinkers.
-- Approx Rs 70/kg difference between tea cost of legitimate importers and smugglers.
-- The business operations and the profitability of legitimate commercial importers and packers severely curtailed, resulting in loss of revenue, cut down in jobs and closure of factories.
-- With prevailing high food inflation in economy, tea is the cheapest beverage available to the vast majority of rural public.
-- Smuggling through ATTA has gone as high as 43 percent compared to legal imports of 57 percent.
-- Proposals: It is strongly recommended that the GST on eatable, if utmost necessary should not be more than 5 percent.
-- Alternatively, the GST be reduced to 5 percent while Customs duty should be abolished, since the only way to effectively curb smuggling in short-term is to take immediate fiscal measures.
-- Benefit: According to the calculated estimates, this measure will generate additional revenue of Rs 688 million to the national exchequer.