PESHAWAR: Traders expressed outcry over enforcement of 2 per cent Infrastructure Development Cess (IDC) on export from Khyber Pakhtunkhwa and feared the export tax will adversely hamper economic growth and regional trade.
Despite the prolonged anti-IDC campaign and dialogue by business leaders with relevant authorities, even reservations conveyed in upper house of the parliament, the Government of Khyber Pakhtunkhwa enforced 2 percent export tax under Infrastructure Development Act from July 01, next and make it part of the finance bill and budget documents 2025-26.
It is noted to mention here that the provincial government has imposed 2 percent export tax through Infrastructure Development Act 2022, which is continuously implemented by making it part of Finance Bill/budget documents of every fiscal year. On the other hand, the Business community vigorously campaigned against IDC and proactively took up this issue with authorities and every forum at central and provincial level.
Export process has already been slowed down from Khyber Pakhtunkhwa as business community/ exporters preferred to shift their consignments to Islamabad and other provinces to prevent huge financial losses, in wake of enforcement of 2 percent IDC on export, reports say.
The Federating Units (provinces) are competent to levy cess on goods/services produced, brought into or taken out of the province. Provincial governments have already levied IDC on imports and are collecting the same through Customs computerised system for the past over one decade, experts say. They added the provinces under the Constitution appear to have power to levy an IDC on transportation, carriage or movement of goods for imports to or exports from the province. However, they stated in order to encourage exporters and to increase exports, duties/taxes are usually not levied on exports as it might have an adverse effect on exports and the flow of foreign exchange into the country.
Traders categorically reject implementation of 2 per cent export tax by the provincial government and stated that export tax would negatively impact exports from the province. They furthermore said KP export cess will undermine the competitiveness of Pakistan’s exports. A large number of vehicles-loaded with essential food items were entered on regular basis in city and other parts of the province, after the imposition export tax.
The prices of daily use items will go up instantly, said Shakeel Ahmad Saraf, president of the Peshawar Small Traders and Small Industries (PST&SI). He said price-hike will directly affect the already inflation-stricken people of the province. Exports cannot be taxed, and they should be incentivised “if we are serious about the progress of the country and the prosperity of the people of Pakistan,” he remarked. “Exports are vital to the country. All governments need to support this national effort,” he said.
Businessmen recommended the federal government convince KP province through the Council of Common Interests for the exemption of exports from direct and indirect provincial levies. Like the consignments routed through KP, this additional cost will now apply to all exports via Balochistan to Afghanistan and Central Asia, as well as Iran, Turkiye and beyond, traders say.
“Exports are vital to the country. All governments need to support this national effort,” Shakeel Saraf remarked. He urged the provincial government to review its decision and take it back immediately. Small traders will soon decide future course of action against export tax, if the government didn’t pay heed to their demands, he warned.
Copyright Business Recorder, 2025
