PCDMA chief exposes rampant EFS exploitation
The veteran trade representative warned that the scheme, designed to boost exports, has instead become a pipeline for duty evasion and revenue leakage.
Presenting import-export data analysis, Valimuhammad revealed that under Chapters 27 to 32 of chemicals & dyes - particularly 3204 - imports surged by 80% between 2023-2024 while corresponding exports showed no growth.
'This glaring discrepancy proves large-scale duty-free imports are being diverted to local markets instead of being used for export production,' he stated in a press release.
The PCDMA chief provided a detailed breakdown showing that just for Chapter 3204 imports, the government should have collected approximately Rs 6 billion in Customs duty and Rs 18 billion in sales tax, totalling Rs 24-25 billion in potential revenue. However, actual collections remained alarmingly low, indicating massive leakage in the system.
Valimuhammad proposed urgent reforms to curb EFS misuse, including immediate processing of 18% sales tax rebates and Customs duty refunds upon receipt of export remittances to improve cash flow for genuine exporters. His key recommendation was imposing a complete ban on duty-free imports under EFS without valid export Letters of Credit (LCs).
Highlighting the scheme's distortive impact on trade, the PCDMA chairman noted a 25% decline in association membership over two years as regular importers couldn't compete with industries availing duty-free raw materials.
'While importers pay customs duty, income tax and additional sales tax, some industries get completely tax-free imports under EFS - this discriminatory treatment is destroying level playing field,' he argued.
'Dozens of legitimate importers of chamicals & dyes have been forced to shutter their businesses completely as a direct result of these scheme violations.'
Expressing frustration over official inaction, Salim Valimuhammad revealed that despite submitting detailed budget proposals to FBR highlighting EFS anomalies and suggesting corrective measures, the association has received no response. He made a direct appeal to Prime Minister Shehbaz Sharif, Finance Minister Muhammad Aurangzeb and FBR Chairman Rashid Mahmood Langrial to immediately restrict EFS benefits only to actual export production and completely disallow duty-free imports without verified export LCs.
Copyright Business Recorder, 2025
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