KARACHI: Since the withdrawal of zero-rating status through Finance Act 2016, local stationery manufacturers are being undermined by smuggled, under-invoiced, misdeclared goods coming via the Afghan Transit Trade (ATT).

As a result of this smuggling, two of the eight units engaged in manufacturing educational stationery have already closed down. The remaining industry, faced by the onslaught of under-valued and smuggled stationery, is on the verge of collapse, industry sources said.

According to sources, the Finance Act 2016 abolished sales tax zero-rating status of locally manufactured educational stationery and converted the same into sales tax exemption.

As a consequence of the said amendment, 17 per cent sales tax has been levied on all inputs that go into local manufacturing of stationery. Since this could not be adjusted in final sales, it increases the cost by 8-12pc and has an impact of round 12-14pc at wholesale stage and 25-50pc at retail level, sources said.

Talking to Dawn, Riaz Uddin, chief executive of Dollar Industries, lamented that imported stationery including pencils, erasers, sharpeners, geometry boxes, pens, markers, writing pads, drawing and marking inks and exercise books continue to enjoy exemption from sales tax levy.

Under these circumstances, how can the local industry survive, questioned.

He stressed that the local industry provides jobs to around 22,000 workers, helps save precious foreign exchange in the form of import substitution and also contributes towards federal and provincial taxes.

Mr Imran Ghani, also engaged in manufacturing of educational stationery, said the sale tax anomaly created by the Finance Act 2016 has thrown local manufacturing into disarray. We lost the competitive edge badly needed by any industry to survive against cheap and under-invoiced imports, he stressed.

Another stationery manufacturer said that though the government’s intention has always been to provide relief to education seekers, however change in the status from zero-rating to exemption has inadvertently created problems for the local industry.

Published in Dawn, February 28th, 2017