Tax-Free Chinese Imports to Gilgit-Baltistan Could Harm Local Industry, Fuel Smuggling: FPCCI Businessmen Panel

By Farzana Chaudhry
Lahore, Pakistan
LAHORE — The Businessmen Panel (BMP) of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has strongly criticized the Federal Board of Revenue’s (FBR) decision to allow duty- and tax-free imports of Chinese goods through the Sost Dry Port for Gilgit-Baltistan, warning that the move could trigger widespread smuggling, under-invoicing and institutional corruption, while placing further strain on Pakistan’s already struggling industrial sector.
Former FPCCI president and Chairman of the Businessmen Panel, Mian Anjum Nisar, referred to SRO 2488(I)/2025, clarifying that the notification does not grant an unconditional or blanket exemption. Under the SRO, the non-levy of sales tax, income tax and federal excise duty is subject to quota limits, online authorization through the Customs Computerized Clearance System, and certification that imported goods are consumed strictly within Gilgit-Baltistan.
However, Nisar cautioned that “conditions on paper do not automatically translate into effective control on the ground.”
He said Pakistan’s industrial sector is already under severe pressure due to high energy tariffs, rising input costs, heavy taxation, tight financing conditions and weak domestic demand. In this environment, even conditional tax relief on imported finished and intermediate goods creates market distortions that disadvantage documented local manufacturers.
While acknowledging that the stated objective of the SRO is to facilitate economic activity in Gilgit-Baltistan, the BMP chairman warned that past experience with region-specific tax concessions shows a consistent pattern of misuse. He cited earlier exemptions granted to the former FATA and PATA regions, noting that despite monitoring conditions, duty- and tax-free goods frequently leaked into settled areas, damaging local industries and causing substantial revenue losses.
According to Nisar, the risk of diversion is particularly high in Gilgit-Baltistan due to difficult terrain, limited enforcement capacity and overstretched customs and law enforcement agencies. “Expecting authorities to fully ensure that conditionally exempted goods remain confined within GB is unrealistic, especially when profit incentives for diversion are high,” he said.
He further noted that Pakistan currently has surplus capacity in key industrial sectors, particularly steel and construction materials, and therefore no supply-side justification exists for allowing even conditionally tax-relieved imports of finished goods. Gilgit-Baltistan’s construction and infrastructure needs, he argued, can be met through locally manufactured products supplied via documented channels, supporting employment and contributing to national revenue.
The BMP chairman warned that conditional tax relief on Chinese imports, even within quota limits, would encourage unfair competition. Domestic manufacturers, he said, are required to pay full customs duties, sales tax, income tax, federal excise duty, along with exceptionally high electricity and gas tariffs, making it impossible to compete on equal terms with partially tax-exempt imports.
He also raised concerns over under-invoicing and misdeclaration risks along the Sost Dry Port route, stressing that any tax concession increases incentives for such practices. Once a parallel supply chain develops under the guise of regional consumption, he warned, it becomes extremely difficult to dismantle, causing long-term damage to the formal economy.
While the SRO allows customs authorities to withdraw exemptions in cases of misdeclaration or diversion of goods outside Gilgit-Baltistan, Nisar said post-facto enforcement does little to undo the market damage already caused by the leakage of tax-relieved goods into mainland markets.
Reaffirming the BMP’s support for the socio-economic development of Gilgit-Baltistan, he stressed that sustainable progress should be achieved through infrastructure investment, improved connectivity, facilitation of local enterprises and transport or freight support, rather than import-based tax concessions that distort national markets.
Nisar urged the federal government to review the implementation framework of SRO 2488(I)/2025 in consultation with the business community and chambers of commerce. He called for restricting any conditional tax relief strictly to raw materials where necessary, while excluding finished and intermediate goods that directly compete with domestic industry.
He also emphasized the need for stronger safeguards, including advance guarantees against duties and taxes, independent verification of consumption certificates, and transparent monitoring mechanisms jointly overseen by federal and provincial authorities.
“Pakistan’s economic recovery depends on protecting documented industry, ensuring fair competition and learning from past policy failures,” the BMP chairman said, warning that conditional concessions must be enforceable in practice — not just well-drafted on paper — to avoid becoming yet another channel for smuggling, under-invoicing and erosion of the tax base.