The federal government is considering major changes to the Export Facilitation Scheme in the upcoming 2026–27 budget to prevent the alleged misuse of flying invoices by commercial importers in local markets.
According to sources quoted by Business Recorder, policymakers are reviewing proposals to withdraw tax exemptions currently available to commercial importers under the scheme. The move aims to tighten oversight, increase tax collection, and create a level playing field for documented industries.
Proposal Targets Misuse of Flying Invoices
Officials said one of the key proposals under discussion involves ending the facility that allows commercial importers under the Export Facilitation Scheme to transfer sales tax invoices in the domestic market.
Documented sectors, including the steel industry, have urged the government to remove these exemptions, arguing that the existing framework enables widespread misuse through flying invoices and input tax manipulation.
Industry representatives claim that businesses operating transparently and paying taxes are struggling to compete against traders who allegedly evade duties and taxes through loopholes in the system.
Steel Industry Raises Concerns Over Unfair Competition
Leading companies in the documented steel sector have reportedly informed authorities that the current system has distorted competition in the local market. They argue that tax compliant manufacturers are facing financial pressure while undocumented operators gain unfair advantages through lower costs.
The industry has demanded immediate reforms to stop revenue leakages and restore fair market conditions.
Stakeholders also called for rationalization of Serial Number 57 of Table 2 under the Sixth Schedule of the Sales Tax Act, which deals with tax exemptions. Officials believe revising this provision could help curb the misuse of input tax claims.
Govt Reviewing Reduction in Discount Rate
Another proposal under review seeks to reduce the discount rate at the import stage from 17.5 percent to zero under the scheme.
Industry representatives argue that the deferment of value addition sales tax has caused substantial revenue losses for the Federal Board of Revenue while also creating price distortions in the steel scrap market.
According to stakeholders, different tax treatments for the same imported products have affected landed costs and disrupted competition across the sector.
Budget 2026–27 May Include EFS Reforms
The proposed changes are expected to be discussed as part of the federal budget for fiscal year 2026–27. Officials say the government wants to strengthen documentation of the economy while reducing opportunities for tax evasion and fraudulent invoicing practices.
Business groups from documented sectors insist that reforms to the Export Facilitation Scheme are necessary to protect tax compliant industries and improve government revenue collection.
The government has not yet made a final decision, but consultations with industries and tax authorities are continuing ahead of the budget announcement.