The Karachi Chamber of Commerce and Industry (KCCI) has formally requested the government to exempt fast-moving consumer goods (FMCGs) from the collection of advance tax under Sections 236G and 236H of the Income Tax Ordinance, 2001.
These recommendations were presented as part of the KCCI’s proposals for the upcoming Federal Budget for the fiscal year 2025-26. The chamber highlighted that the existing tax structure places an undue burden on several vital sectors, particularly those dealing with essential commodities.
Pulses and Beverages Sectors Significantly Impacted
The KCCI specifically pointed out that the pulses and beverages sectors, both falling under the broader category of FMCGs, are heavily affected by the current advance tax requirements. The chamber argued that the necessity for manufacturers, importers, and retailers to pay advance tax on transactions increases their operational costs, which are ultimately passed on to consumers, thereby contributing to inflation, especially for food items.
The KCCI voiced its concern regarding the exclusion of pulses from the list of goods exempted from advance tax, despite their crucial role as a staple food. This exclusion, according to the KCCI, leads to higher distribution costs and disproportionately affects low-income households and small businesses. Furthermore, the chamber noted that beverage manufacturers within the FMCG sector face unequal treatment as they remain subject to tax collection obligations that do not apply to other FMCG categories.
KCCI’s Key Recommendations for Tax Relief
In its official proposal to the government, the KCCI outlined three primary recommendations:
- Inclusion of Pulses in Negative List: The KCCI recommended that pulses should be added to the negative list under Sections 236G and 236H to exempt them from advance tax collection.
- End Manufacturer Role as Collecting Agent: The chamber proposed that FMCG manufacturers should no longer be required to act as collecting agents under these sections, arguing that collecting taxes at every stage of the supply chain is impractical.
- Consideration for Other Essential Items: The KCCI suggested that the government should also consider exempting other essential items, alongside pulses and FMCGs, to alleviate the financial burden on both businesses and consumers.
Aiming to Curb Inflation and Ensure Affordability
The KCCI believes that the implementation of these proposed changes would align with the government’s stated objectives of controlling food inflation and ensuring the affordability of everyday necessities. By addressing what the KCCI perceives as structural inefficiencies in the current tax framework, the chamber contends that the operational efficiency of businesses and the welfare of consumers within the FMCG sector can be significantly enhanced.
The KCCI reiterated its commitment to advocating for a more balanced and pragmatic tax policy that fosters economic growth while safeguarding the interests of vulnerable segments of the population.
