Chemical Industry Calls for Tax Relief and Customs Reforms Ahead of Pakistan’s 2026-27 Budget

By Muhammad Shahzad | Karachi, Pakistan
KARACHI: The Pakistan Chemicals & Dyes Merchants Association (PCDMA) has urged the government to reduce tax rates, simplify compliance procedures, and introduce customs reforms in its budget proposals for fiscal year 2026-27 submitted to the Federal Board of Revenue (FBR).
PCDMA Chairman Salim Valimuhammad said growing compliance requirements and aggressive audit practices were pushing businesses toward the informal economy, stressing that tax authorities should focus on facilitating taxpayers rather than penalizing them for genuine mistakes.
“Taxpayers generally want to comply with tax laws, but complicated procedures and lack of guidance often result in genuine errors,” he said, calling on the FBR to adopt a more supportive and educational approach.
Among its key recommendations, the association proposed reducing the General Sales Tax (GST) rate from 18 percent to 16 percent, followed by a gradual move toward a single-digit tax regime. According to the PCDMA, lower tax rates would encourage compliance, expand the documented economy, and ultimately boost government revenues.
The association also called for the restoration of the Final Tax Regime (FTR) for commercial importers and the reinstatement of audit protections previously linked to the payment of additional sales tax. It argued that the removal of these safeguards has increased uncertainty and compliance costs for importers.
To address liquidity challenges faced by traders and wholesalers, the PCDMA proposed restoring Section 8B facilities for commercial importers. As an interim measure, it suggested allowing businesses to adjust up to 95 percent of output tax against input tax, with only five percent payable in cash.
The association further recommended reducing the further tax rate from four percent to one percent, arguing that a lower rate would discourage fake invoicing and improve tax compliance.
On income tax matters, the PCDMA proposed lowering withholding tax on local supplies of raw materials from the existing rates of five percent and 5.5 percent to two percent and 2.5 percent, respectively. It said the reduction would encourage businesses to remain within the documented sector.
The association also raised concerns over what it described as unequal tax treatment between commercial and industrial importers under Section 148 of the Income Tax Ordinance, urging the government to ensure uniform taxation of identical imports regardless of whether they are brought in by traders or manufacturers.
Among customs-related proposals, the PCDMA called for the abolition of the Rs500 WeBOC token fee on goods declarations, arguing that importers are effectively paying duplicate charges following the implementation of the Pakistan Single Window (PSW) system.
It also sought the restoration of NTN-based self-clearance facilities for commercial importers, saying the withdrawal of the facility has increased delays and administrative bottlenecks at customs offices.
In addition, the association recommended discontinuing the Export Facilitation Scheme (EFS), claiming that it is susceptible to misuse and revenue leakage. Instead, it urged the government to strengthen and expedite the tax refund mechanism to support genuine exporters.
The proposals have been submitted to the FBR and are expected to be reviewed during pre-budget consultations with trade and industry stakeholders ahead of the announcement of Pakistan’s federal budget for 2026-27.