The Hindu Business Line : <I>Smuggling of tea into Pak worries tea exporters</I>

It's time for cross-border trade in commodities like tea. That is the latest talking point in Indian and Pakistani business circles, with the smuggling of commodities into Pakistan through the porous Afghan border.

Call it the result of a growing bonhomie or just plain business sense, both Indians and Pakistanis are discussing something quite different: smuggling daily requirements into Pakistan through the Afghan border under the garb of the Afghan Transit Trade Agreement.

A section of the Indian business community, including tea producers and exporters, are not happy as it is unable to compete in the neighbouring market, where it is supposed to have an advantage inlogistics and transportation.

The Pakistanis are worried because legal trade is hugely affected. For example, out of the total annual requirement of around 170 million kg of tea for domestic consumption, 40 million kg is smuggled from Afghanistan.

According to Mr Md Altaf, Chairman of the Pakistan Tea Association, the import tariff structure needs to be changed immediately to put a check on the growing illegal trade.

Tea imports from India into Pakistan are subjected to a 10 per cent duty. There is also a 15 per cent sales tax, an additional 10 per cent VAT and 2 per cent income tax on imports.

"There is high incidence of tax on imported tea. Compared to it, illegal traders are not paying any tax. The Pakistani government in its Union Budget should reduce import duty on Indian teas and other teas too," said Mr Altaf. He was recently in India leading a 14-member Pakistani delegation.

In fact, Indian tea exporters were subjected to higher duties. About a year ago, the duty was reduced from 35 per cent to 10 per cent; Indian exporters said the credit goes to their Pakistani friends.

"Yes, we want the Pakistani Government to reduce duties. But it is not of much importance for us because we are not the biggest exporters in that market. Like any other exporting market, we too want the tariffs to be reduced," an official of the Indian Tea Association said.

Kenya is the biggest tea exporter to Pakistan and pays the same duty as India. However, the country is the biggest source of smuggled tea into Pakistan.

Most of the smuggled teas are found in the western side of Pakistan. These teas are popular in Balochistan, North Western Frontier Province and the interior sections of Sindh. Here, the landed cost of smuggled teas is only Rs (Pak) 130 per kg against Rs (Pak) 160 per kg of legally imported teas.

More Stories on : Taxation | Economic Offences | Tea

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