KARACHI, June 18: The substantial increase in infrastructure cess from 0.5 per cent of the C&F value to 0.8 per cent in the new Sindh budget will divert imports from the Karachi Port to the dry ports in the upcountry, customs agents said.

Tax experts have described the 60 per cent raise in cess as unprecedented in tax history as rate of tax is generally increased between five to 10 per cent.

They said the move apparently taken to boost revenue would prove to be anti-revenue exercise as importers would prefer clearing their goods from dry ports in Punjab where there is no infrastructure cess.

Karachi Customs Agents Group secretary general Arshad Jamal said that the raise in infrastructure cess was not acceptable and importers and traders would lodge strong protest with the Sindh government.

He said that the new cess tax rate would affect consumers as it would be passed on to them by importers, thus resulting in inflation in prices, especially of essential goods.

He further said that importers would boycott clearance of consignments at the Karachi Port and would ultimately divert their consignments to the upcountry dry ports for clearance.

The ministry of excise and taxation collects on average Rs5,500 million from the existing rate (0.5 per cent) on all imports landing at the Karachi Port, Port Qasim and Jinnah Terminal.

The tax experts estimated that the enhanced tax rate would create an impact of Rs3,300 million on cost of imports which would be passed on to the common man.

They said that the finance department had better options to increase revenue of the Sindh government.

Citing examples they said that no efforts had been taken over the years to rationalise professional tax, which is charged at the rate of Rs150 on individuals.

Limited companies with a paid-up capital of Rs10 million pay professional tax at Rs10,000 per annum.

In this category, the maximum tax is Rs100,000 for companies with paid-up capital of Rs200 million and above.

The tax slab in this category could have easily raised to Rs1 million for companies having higher paid-up capital.

Experts further suggested that the tax on turnover of exporters, importers , industrial units, car dealers, contractors, architects, etc., is Rs2,500 on a turnover of Rs25 million and Rs100,000 for turnover of over 10 million. Here the tax slab rate could have been raised to Rs1 million for higher turnovers if the government was keen to boost its revenue.

They further said that Rs250 professional tax is charged on petrol pumps annually and there was good reason to raise this tax in view of the substantial increase in prices of petroleum products.