KARACHI – Salim Valimuhammad, Chairman of the Pakistan Chemicals & Dyes Merchants Association (PCDMA), has exposed rampant exploitation of the Export Facilitation Scheme (EFS), with fraudulent practices reportedly costing the national treasury a staggering Rs. 25 billion.
The veteran trade representative warned that the scheme, designed to boost exports, has instead become a pipeline for duty evasion and revenue leakage.
Presenting import-export data analysis, Valimuhammad revealed that under Chapters 27 to 32 of chemicals & dyes, particularly 3204, imports surged by 80% between 2023 and 2024 while corresponding exports showed no growth. “This glaring discrepancy proves large-scale duty-free imports are being diverted to local markets instead of being used for export production,” he stated in a press release.
The PCDMA chief provided a detailed breakdown showing that, for Chapter 3204 imports alone, the government should have collected approximately Rs. 6 billion in customs duty and Rs. 18 billion in sales tax, totalling Rs. 24-25 billion in potential revenue. However, actual collections remained alarmingly low, indicating massive leakage in the system.
Valimuhammad proposed urgent reforms to curb EFS misuse, including immediate processing of 18% sales tax rebates and customs duty refunds upon receipt of export remittances to improve cash flow for genuine exporters. His key recommendation was imposing a complete ban on duty-free imports under EFS without valid export Letters of Credit (LCs).
Highlighting the scheme’s distorting impact on trade, the PCDMA chairman noted a 25% decline in association membership over two years, as regular importers couldn’t compete with industries that were availing themselves of duty-free raw materials. “While importers pay customs duty, income tax and additional sales tax, some industries get completely tax-free imports under EFS – this discriminatory treatment is destroying the level playing field,” he argued.
“Dozens of legitimate importers of chemicals & dyes have been forced to shutter their businesses completely as a direct result of these scheme violations. ”
Expressing frustration over official inaction, Salim Valimuhammad revealed that despite submitting detailed budget proposals to FBR highlighting EFS anomalies and suggesting corrective measures, the association has received no response. He made a direct appeal to Prime Minister Shehbaz Sharif, Finance Minister Muhammad Aurangzeb and FBR Chairman Rashid Mahmood Langrial to immediately restrict EFS benefits only to actual export production and completely disallow duty-free imports without verified export LCs.
“The current loopholes in EFS implementation are not just causing massive revenue losses but also forcing legitimate businesses to shut down,” Valimuhammad warned, urging the government to take corrective action before further damage occurs to both the exchequer and the formal business sector.
