PVMA Chairman Sheikh Abdul Razzak Raises Concerns

Industry representatives have expressed concerns regarding the misuse of tax incentives in the former Federally Administered Tribal Areas (FATA). The concessions introduced in 2019 have faced criticism for their negative impact on the ghee, edible oil, and steel sectors nationwide. Stakeholders from these industries recently gathered in Islamabad to urge the government to eliminate the tax exemptions granted to former FATA and Provincially Administered Tribal Areas (PATA) for a period of five years.

The Pakistan Vanaspati Manufacturers Association (PVMA) Chairman, Sheikh Abdul Razzak, highlighted the significant exemptions provided to FATA, including relief from income tax, sales tax, customs duty on imports, turnover tax exemption, and withholding income tax on local supplies. This has led to a notable disparity of approximately 27% between businesses in former FATA and the rest of the country. The demand for ghee and edible oil in former FATA and PATA is estimated to be 52,000 tonnes from January to May 2024, yet ghee units in these areas have already imported 180,000 tonnes of edible oil, suggesting cross-border sales.

The steel sector has also suffered due to tax exemptions amounting to around Rs50,000 per tonne for steel products. Several steel units in industrial estates like Hattar, Gadoon, and Hayatabad have halted operations, resulting in closures and setbacks in planned investments, including those linked to the China-Pakistan Economic Corridor (CPEC). Additionally, the Fruit Juice Council has called for the removal of Federal Excise Duty and GST on packaged fruit juices in the upcoming Federal Budget 2024-25, citing a decline in industry volumes and its impact on fruit farmers, particularly in Punjab.

The Fruit Juice Council, representing major industry players, has emphasized the negative effects of these taxes on the rural economy and the workforce employed in the sector. With an industry turnover of approximately Rs60 billion in 2022 and over 10,000 individuals employed across various companies, the implications of these tax policies are far-reaching.

The concerns raised by industry stakeholders highlight the need for a balanced approach to tax incentives to ensure equitable growth across all sectors. Addressing the disparities caused by existing exemptions in former FATA and PATA is crucial for fostering a level playing field and promoting sustainable economic development. As discussions continue on tax reforms, it is essential to consider the broader impact on industries, employment, and regional economies to achieve a more inclusive and thriving business environment.