Despite complaints by some disgruntled residents, the Pakistani government has always endeavored to take cognizance of Gilgit-Baltistan (GB) issues and resolve them. Sost Dry Port in GB is a crucial trade hub, primarily facilitating trade between China and Pakistan.
Recently, the Federal Board of Revenue (FBR) issued statutory regulatory order (SRO) 2488 ostensibly to placate the protests of some residents of GB. The SRO states, “Sales tax, income tax, and federal excise duty payable on imports covered under this notification shall not be levied”.
The notified SRO — which could damage the textile sector — was issued on January 1, 2026. As per the SRO, “The benefit of non-levy of sales tax, income tax, and federal excise duty shall be extended by the Collector of Customs on a ‘first come, first serve’ basis within the approved quota limit for goods imported for consumption within the GB region”.
The icing on the cake is that “The GB government shall ensure that all goods imported under this notification are exclusively used within [its] territory”. How? Does GB administration have the critical mass to ‘ensure’ that the facility will not be abused? In addition, “Special procedures shall also be devised by the FBR to effectively identify, track, and clear goods which are imported via Sost for the rest of the country from the goods cleared under this notification.” But, how effective have policies like this been in the past?
‘Past experience clearly demonstrates that similar region-specific tax concession regimes have been repeatedly misused’
The SRO covers every item and gives carte blanche to GB traders to buy whatever they want from China and get it cleared at Sost Dry Port. Notwithstanding the fact that bilateral trade figures between Pakistan and China are heavily tilted in favour of China, this new open permission could further widen the trade gap.
The SRO specified, “The cumulative amounts of sales tax, income tax, and federal excise duty as chargeable under the Sales Tax, 1990 (VII of 1990), Income Tax Ordinance, 2001, and Federal Excise Act, 2005 shall not exceed the limit of Rs4 billion in a fiscal year, as calculated in the Customs Computerised Clearance System.” A generous and merciful assurance for the trade and industry of Pakistan.
Facilitating and encouraging residents are responsibilities of the state, but the modus operandi should always be that other provinces or areas should not be affected. The draft SRO was issued at the fag end of 2025 and, surprisingly, the FBR only allowed three days for objections or comments (25th was a national holiday, 26th was a Friday when establishments in many areas remained closed or worked half the day, and 27th was a Saturday).
Trade and Industry representatives are up in arms and term this SRO as sounding the death knell for Pakistani industries. Take textile, for example. There are 236 importable textile items. Anwer Aziz, Regional Chairman, All Pakistan Textile Processing Mills Association, took exception to allowing textile products, especially those manufactured domestically and sold to local and foreign customers. As an example, he remarked that unbleached and bleached fabrics will enjoy the benefits of the SRO.
Mr Aziz asked, “How many textile processing mills are based in GB?” He added that despite so-called firewalls to check the inflow of imports, there is no guarantee that these fabrics would not find a way to Faisalabad, Lahore, or Karachi, as is the norm under the Afghan-Pakistan Transit Trade Agreement.
Although facilitating GB traders is welcomed, the point is that this facility should also be provided for local manufacturers to sell to GB under exempted sales tax and other taxes. If the cap of Rs4bn is enforced, then local goods could be categorised as ‘exports’ to GB and enjoy the exemptions. There is always the apprehension that this cap could be enhanced in the future to mollify protestors. A senior industrialist noted that the Rs4bn exemptions translate into imports of Rs16–18bn, about $65m. Do GB denizens have the capacity to buy this imported quantity?
Anjum Nisar, former chairman of the Federation of Pakistan Chambers of Commerce & Industry, said, “Past experience clearly demonstrates that similar region-specific tax concession regimes have been repeatedly misused. Earlier exemptions granted to erstwhile federally and provincially administered tribal regions were also subject to conditions and monitoring requirements, yet duty- and tax-free goods found their way across the country, damaging local industries, and causing significant revenue losses.”
The writer is the President of the Employers Federation of Pakistan.
Published in Dawn, The Business and Finance Weekly, January 12th, 2026
