Islamabad: The polypropylene industry has called upon the Federal Board of Revenue (FBR) to implement urgent regulatory and taxation reforms to properly document the supply chain, discourage commercial imports of raw materials, and eliminate widespread tax evasion in the sector.
In separate letters sent to FBR Chairman Rashid Mahmood Langrial and Director General Tax Policy Office Dr. Najeeb Ahmed Memon, the industry pointed out what it termed as unfair and discriminatory tax policies affecting local polypropylene product manufacturers.
The submission, presented by Iskander M. Khan on behalf of the sector, referenced a comprehensive presentation delivered to the FBR on February 24, 2026, titled “Documentation of Polypropylene Industry.”
According to industry stakeholders, polypropylene granules under HS Code 3902.1000 serve as a specialized raw material used exclusively by polypropylene manufacturers. However, they alleged that unchecked commercial imports of this material are enabling undocumented production and untaxed sales across the entire supply chain.
The industry noted that the current withholding tax system puts legitimate industrial importers at a significant disadvantage compared to commercial importers. Industrial importers are currently subject to a 2% minimum tax under Section 148, 5% withholding tax under Section 153, and an additional 5% tax on electricity bills under Section 235. In contrast, commercial importers pay only 3% minimum tax under Section 148 and are exempt from Section 153 withholding tax, while facing minimal electricity-related taxation.
Industry representatives stated that the total tax burden on documented polypropylene manufacturers averages around 7.9% on sales, leading to substantial tax refund claims and severe liquidity challenges for compliant industrial units.
To resolve these challenges, the industry has proposed several key reforms. These include introducing a regulatory duty and a differential sales tax structure on commercial imports of polypropylene raw materials to curb undocumented trade and prevent revenue leakage.
They further recommended establishing a level playing field by providing a general withholding tax exemption to the polypropylene industry under Section 153, while raising the minimum tax rate under Section 148 from 2% to 3% for industrial importers to align it with commercial importers.
The representation emphasized that these measures would not only boost government revenue but also significantly ease the financial pressure on legitimate industrial units that are constantly seeking tax refunds and exemptions.
As a further step toward documentation, the industry proposed making it mandatory for all polypropylene bags produced in Pakistan to display either the Sales Tax Registration Number or Track and Trace Registration Number. This requirement, they argued, would enable authorities to better detect undocumented production and improve traceability throughout the supply chain.
The letters stressed that adopting these recommendations would effectively close revenue leakages in the polypropylene sector and promote greater formalization of the economy.