Unsold import inventories pile up on CNIC condition

KARACHI: Importers are sitting on piles of unsold inventories as sales to unregistered buyers, mainly small and medium businesses, have slowed down due to a government’s condition for sellers to obtain national identity of unregistered buyers prior to sale and pay three percent tax, it was learnt on Monday.

Businessmen advised the government to immediately withdraw the conditions, which are needed to support faltering economic activities amid coronavirus challenges.

Agha Shahab, president of Karachi Chamber of Commerce and Industry (KCCI) said waiver of computerised national identity card (CNIC) condition and three percent further tax would result in release of major stockpiles of commodities and consumer goods into the markets, and revenue collection would improve through liberalisation of transactions.

“Small and medium industry will also benefit as a result of such measure because a very large volume of raw materials are supplied to SMEs (small and medium enterprises) by commercial importers who are stuck with inventories,” Shahab said in a letter to PM’s Adviser on Finance and Revenue Hafeez Shaikh.

KCCI president said the government amended sales tax law, through the Finance Act 2019, whereby it was made mandatory for sellers to provide CNIC number of unregistered buyers in the invoice and sales tax returns in addition to pay three percent further tax.

“Since the number of registered persons in sales tax regime stood hardly at around 45,000 all over Pakistan, it is not possible for suppliers/sellers and manufacturers to provide CNIC of buyers on account of all their sales,” he said. “This condition has resulted in a slowdown of business transactions and proliferation of cash economy.”

KCCI letter said the situation further aggravated due to countrywide lockdown after the novel coronavirus that caused disruption in supply chain. Consequently, stocks and inventories with importers, manufacturers and wholesalers are accumulating, while recoveries from markets have completely stopped and a large number of bank defaults are likely to take place due to liquidity crunch, it said.

“Unfortunately, while giving major relief to export sectors which hardly contribute 5 to 6 percent to GDP, the government has entirely ignored the larger sectors of industry and trade catering to domestic markets and contributing 94 percent to GDP and major part of tax revenue,” Shahab said. “It will prove to be detrimental for revenue collection by the FBR if the business transactions remain stalled while the government would surely miss the revenue targets and incur larger fiscal deficit as a result of imposition of CNIC provisions and 3 percent further tax.”

KCCI, representing 22,000 trade and industry members said the requirement of CNIC for sales to unregistered persons and three percent further tax has to be waived immediately in order to revive the economic activities and business transactions.