Coffee Firms Advocate for Duty Removal on Instant Coffee Imports

LAHORE: Businesses operating in Pakistan’s coffee sector are appealing to the government to eliminate regulatory duties and additional customs duties on imported bulk instant coffee. They assert that the existing duty structure significantly impedes the expansion of the coffee industry.

The core of the issue lies in SRO 840(I)/2021, implemented in June 2021, which levied substantial import duties on coffee. Finished coffee goods face duties ranging from 42% to 53%. Even bulk instant coffee, the essential raw material for local producers, is subject to a 28% tax, encompassing a 15% Regulatory Duty (RD) and a 2% Additional Customs Duty (ACD). By contrast, tea imports are taxed at a mere 13%, creating an imbalanced environment between the two beverage sectors.

Industry representatives contend that these duties not only hinder the competitiveness of local enterprises but also deter investment in Pakistan’s burgeoning coffee market. They emphasize that eliminating RD and ACD on bulk instant coffee imports would conform to the National Tariff Policy’s guidelines, particularly paragraph 6.3, which advocates for rationalizing tariffs on raw materials to bolster domestic industry.

The prospective advantages of decreasing these duties are extensive. Reduced import expenses would directly lower production costs for local manufacturers, encouraging more businesses to enter the coffee sector and invest in essential infrastructure. With improved access to reasonably priced raw materials, companies could establish domestic processing and packaging facilities, fostering job creation and supporting financial activity.

Furthermore, reduced duties could broaden the consumer base. More affordable coffee products would be available to a wider portion of the public, potentially boosting domestic consumption. As demand increases, the industry could experience the entry of new participants and a greater variety of offerings, contributing to a vibrant coffee culture.

The government stands to gain from the increased economic activity generated by an expanding coffee industry. While eliminating duties may decrease immediate customs revenue, the lasting benefits through increased income tax, sales tax, and job opportunities could offset any initial losses. Furthermore, enhanced domestic production capabilities would unlock opportunities for exporting value-added coffee items, such as ready-to-drink beverages, potentially strengthening Pakistan’s export capabilities.

Given the growing popularity of coffee among younger demographics and the swift proliferation of café chains in urban centers, many suggest now is the opportune moment for policy changes. Industry representatives consistently emphasize that easing the import burden on instant coffee is not merely a business-friendly action but a calculated move towards cultivating a competitive and sustainable coffee industry within Pakistan.