KARACHI (GNP): The Pakistan Chemicals & Dyes Association (PCDMA) has urged the Federal Board of Revenue (FBR) to ease the compliance burden on businesses, cut the General Sales Tax (GST) rate, and restore protections for importers in its pre-budget proposals submitted ahead of the federal budget 2026-27.
PCDMA Chairman Salim Valimuhammad warned that mounting compliance requirements and aggressive audits are steadily driving taxpayers into the informal economy. “People generally want to pay taxes, but due to limited awareness and tech-savviness they make honest mistakes, and FBR takes advantage of that,” he said, stressing that officers should guide taxpayers instead of issuing harsh notices.
“Taxpayers generally want to comply with tax laws, but complicated procedures and lack of guidance often result in genuine mistakes,” Mr. Valimuhammad said, adding that the FBR should adopt a facilitative and educational approach instead of relying on notices and enforcement measures.
Among the association’s key recommendations is a reduction in the GST rate from 18 per cent to 16pc, followed by a gradual transition to single-digit taxation. Mr. Valimuhammad argued that lower tax rates would improve compliance, broaden the tax base and ultimately increase government revenues.
The PCDMA chairman also called for the restoration of the Final Tax Regime (FTR) for commercial importers and the return of audit exemptions that were previously linked to the payment of additional sales tax. He said the withdrawal of these protections had increased uncertainty and compliance costs for importers.
To ease liquidity constraints faced by traders and wholesalers, PCDMA proposed restoring Section 8B facilities for commercial importers. As an interim measure, he suggested allowing businesses to adjust up to 95pc of output tax against input tax, with only 5pc payable in cash.
Highlighting concerns over fake invoicing, the PCDMA chief recommended reducing the further tax rate from 4pc to 1pc, arguing that a lower rate would encourage compliance and reduce incentives for fraudulent practices.
On income tax, PCDMA proposed lowering withholding tax on local supplies of raw materials from the current rates of 5pc and 5.5pc to 2pc and 2.5pc respectively. He maintained that lower withholding taxes would encourage businesses to operate within the documented economy.
The association also objected to what it described as unequal tax treatment between commercial and industrial importers under Section 148 of the Income Tax Ordinance. Mr. Valimuhammad said identical imports should be taxed uniformly, regardless of whether they are imported by traders or manufacturers.
Among customs-related proposals, the PCDMA chairman called for the abolition of the Rs500 WeBOC token fee on goods declarations, arguing that importers were effectively paying duplicate charges after the introduction of the Pakistan Single Window (PSW) system.
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He further sought the restoration of NTN-based self-clearance facilities for commercial importers, saying the withdrawal of the facility had increased delays and administrative bottlenecks at customs offices.
PCDMA also recommended discontinuing the Export Facilitation Scheme (EFS), claiming it was vulnerable to misuse and revenue leakage. Instead, he urged the government to strengthen and expedite the tax refund system to support genuine exporters.
The proposals have been submitted to the FBR and are expected to be discussed during pre-budget consultations with trade and industry stakeholders ahead of the federal budget announcement.
