Pakistan's cement industry grapples with local tax issues

Pakistan’s cement industry is grappling with local tax measures announced in the Federal Budget 2025 amid falling local demand and has sought the intervention of the federal government to rescue the industry. In an appeal to the Prime Minister of Pakistan, Shehbaz Sharif, the Federal Minister for Finance and Revenue, Senator Muhammad Aurangzeb, and the Chairman of the Federal Board of Revenue (FBR) Government of Pakistan, Malik Amjed Zubair Tiwana, All Pakistan Cement Manufacturers Association (APCMA) drew the attention on the deteriorating condition of the sector.

According to the appeal, cement sales in Pakistan dropped by 30 per cent in July 2024 compared to last year. This is attributed to the Federal Budget 2024, which has further burdened the already overtaxed cement sector.

These tax measures are not just numbers on a balance sheet. They are significantly negatively impacting the growth of the cement industry. The government needs to reconsider these measures.
1. The federal excise duty (FED) has been increased by 100 per cent from PKR100/bag (US$0.36/bag) to PKR200/bag.
2. There is an anomaly in the retailers’ tax: cement retailers are subject to turnover tax at 0.25 per cent. In contrast, the withholding tax rate under section 236H is 0.50 per cent, causing an undue
financial burden on the retailers.
3. The installation of a point of sale (POS) system forces cement retailers to register in the sales tax regime and installing POS will not yield any additional sales tax revenue as cement, a Third Schedule item, already pays sales tax on the maximum retail price.
4. The taxation of income from exports has been excluded from the Final Tax Regime and replaced by the Normal Tax Regime, which will make exports non-competitive in the international market.

The cement industry highlights the issues and expresses its readiness to collaborate with all concerned authorities. We are appealing for concrete corrective measures to reduce the burden of heavy taxes on this vital sector of the economy without compromising the government’s revenue, APCLA remarked. The government’s a solution that benefits all through constructive dialogue.