According to Chairman of the Pakistan Chemicals and Dyes Merchants Association (PCDMA), Saleem Wali Muhammad, alleged misuse of the Export Facilitation Scheme (EFS) is causing billions of rupees in losses to the national exchequer and forcing import businesses to close. Mr. Muhammad claims that duty-free raw materials imported under EFS are being sold domestically, resulting in the loss of billions of rupees in revenue.
He cited an 80% increase in imports of chemicals and dyes between 2023 and 2024, particularly under Chapters 27 to 32, and specifically under Chapter 3204. He states that this increase isn’t reflected in export figures, indicating widespread fraud. Mr. Muhammad estimates that approximately 24-25 billion rupees should have been collected in customs duties and sales tax from Chapter 3204 alone, but actual collection is far less.
The PCDMA chairman appealed to Prime Minister Shehbaz Sharif, Finance Minister Ishaq Dar, and FBR Chairman Rashid Mehmood Langrial to address the issue. He recommended linking the 18% sales tax or customs rebate under EFS to the receipt of foreign remittances by exporters. He believes this will discourage exporters from delaying remittances in hopes of a favorable exchange rate, which will boost foreign exchange reserves.
To curb EFS exploitation, Mr. Muhammad proposed banning imports under the program without an export Letter of Credit (LC). He pointed to a 25% decrease in PCDMA membership over the past two years as evidence of the devastating impact of EFS misuse on import businesses. He also highlighted the unequal treatment of importers, who bear the burden of multiple taxes and duties, while industries importing duty-free raw materials under EFS enjoy this exemption.
Mr. Muhammad expressed disappointment over the FBR’s lack of attention to his organization’s budget proposals, which included recommendations to address EFS irregularities. He urged high-ranking government officials to restrict EFS imports to industrial production and impose a ban on duty-free imports under the scheme without an export LC.