Cement dealers across Pakistan have initiated an indefinite nationwide strike, protesting against the heightened withholding tax on cement and other tax measures introduced in the federal budget for 2024-25. The All Pakistan Cement Dealers Association has voiced concerns about the sustainability of the cement business under these new financial conditions and is calling for government intervention to address the issue.
The government’s decision to raise the withholding tax to 2.5 percent for non-filers under Section 236H of the Finance Act 2024 has been met with significant backlash from the cement industry. This increase, along with new turnover taxes on dealers and retailers, has severely impacted the profitability and sustainability of cement businesses across the country.
Sajid Chaudhry, Chairman of the All Pakistan Cement Dealers Association, highlighted the negative repercussions of these taxes. He noted that the additional financial burden, coupled with the requirement for Point of Sale (PoS) machines, is beyond the capabilities of many dealers and retailers, particularly those who lack the necessary resources and education to comply with these new demands.
In response to the tax hikes, the All Pakistan Cement Dealers Association has called for immediate government intervention. They have proposed the introduction of a presumptive tax regime as a potential solution to the current crisis. The association has warned that if these issues are not addressed promptly, many businesses could face closure, leading to increased unemployment and exacerbating economic challenges in the country.
The federal budget for 2024-25 has also increased the Federal Excise Duty (FED) on cement to Rs 4 per kilogram, doubling from Rs 2 in the previous fiscal year. This additional burden has further strained the cement industry, which is already grappling with high production costs and fluctuating market conditions.
The ongoing strike has raised concerns about the availability of cement in the market, which could potentially lead to a shortage if the protest continues for an extended period. Cement is a critical component in the construction industry, and any disruption in its supply chain can have widespread implications for infrastructure projects and housing developments across the country.
Moreover, the increased taxes have created an environment of uncertainty among dealers and retailers. Many are apprehensive about their ability to sustain operations under the new tax regime, which they argue is disproportionate to their earnings and market conditions.
Interestingly, while the domestic market faces significant challenges, cement exports from Pakistan have seen a notable increase. According to the Pakistan Bureau of Statistics (PBS), cement exports rose by 40.46 percent during the first eleven months of the financial year 2023-24 compared to the same period the previous year. The exports were valued at $236.797 million from July to May (2023-24), up from $168.583 million during the same months in 2022-23.
This increase in exports indicates that despite the domestic challenges, Pakistani cement remains competitive in the international market. However, the benefits of this export growth are unlikely to offset the domestic issues caused by the increased taxes and regulatory requirements.
The cement dealers’ strike highlights the urgent need for a balanced approach to taxation that considers the economic realities of businesses while ensuring government revenue. The proposed presumptive tax regime could provide a middle ground, offering a simplified tax structure that is easier for dealers and retailers to comply with.
Additionally, the government could consider providing educational resources and support to help smaller businesses adapt to the new requirements, particularly the implementation of PoS systems. This support could include training programs, subsidies for purchasing necessary equipment, and a phased implementation plan to give businesses time to adjust.
