Customs duty exemption and significant sales tax reduction on imported 500k MT of sugar by FBR, now set at 0.25% from the initial 18%.
The Federal Board of Revenue (FBR) of Pakistan has announced significant tax concessions for the import of 500,000 metric tons of white crystalline sugar. The decision, outlined in Statutory Regulatory Orders (SROs) 1215(I)/2025 and 1216(I)/2025, aims to increase sugar supply, stabilise prices, and support both the Trading Corporation of Pakistan (TCP) and the private sector.
### Details of the Decision
The FBR's measures include exemptions from customs duty, a reduction in sales tax from 18% to 0.25%, a reduction in withholding tax to 0.25%, and an exemption from the 3% minimum value addition tax (VAT). These concessions are valid until September 30, 2025.
### Implications
These tax reliefs are expected to stabilise retail sugar prices, enhance competition, and potentially impact domestic sugar producers. The relief might increase competition from imports, putting downward pressure on local sugar prices. However, the Economic Coordination Committee (ECC) earlier expressed reservations about granting such tax relief due to Pakistan’s IMF commitments and fiscal constraints. A Steering Committee has been constituted to further review financial, procurement, and market impact considerations before finalisation.
### Contextual Background
Earlier proposals for such exemptions faced delays and non-approval by the FBR and ECC due to economic and IMF conditionalities. The Finance Bill 2025-26 introduced a wide-ranging tariff rationalization, supporting such relief measures on essential items like sugar.
The FBR issued three notifications (SRO.1215(I)/2025, S.R.O. 1216(I)2025, and SRO.1217(I)/2025) on Wednesday. The S.R.O. 1217(I)/2025 amends the Twelfth Schedule to the Sales Tax Act. 1990, specifying that these tax reductions and exemptions apply to the import and subsequent supply of white crystalline sugar up to 500,000 metric tons by the TCP or private sector, subject to conditions.
The Commerce Division is responsible for ensuring quality assurance of the imported sugar through an international inspection firm. Notices have also been issued to sugar mills for rehearing in a cartelisation case, which is an unrelated event but an important development within the sugar industry.
Stakeholders in the sugar trade are advised to comply with the new tax regime effective immediately under these SROs. The FBR's intervention represents a focused approach to enhance sugar availability, control prices, and balance market needs with fiscal prudence and trade reforms.
The FBR's tax concessions, including custom duty exemptions, reduced sales tax and withholding tax, and VAT exemptions for the import of white crystalline sugar, aim to stabilize retail prices in the finance industry, particularly the sugar trading sector. These reductions and exemptions, valid until September 30, 2025, could potentially increase competition from imports in the industry.
