Pakistan waives tax on goods imported via northern border

The Pakistan government has reached an agreement with traders in the country’s northern Gilgit-Baltistan region along the border with China to end a weeks-long protest which paralysed economic activities and trade.

The agreement with the Gilgit Baltistan (GB) Traders Association follows days of negotiations held at the Federal Board of Revenue (FBR) headquarters in Islamabad. As part of the agreement, federal taxes on goods imported via the Sost border in Gilgit Baltistan would be partially removed.

Trade activities at the Sost border had been suspended due to the protest by traders, who were demanding tax exemptions and the right to freely import goods from China for local consumption without federal taxes.

The deadlock prompted Prime Minister Shahbaz Sharif to form a 22-member committee under the chairmanship of Federal Energy Minister Awais Leghari to address concerns over tax policies and the clearance of stuck consignments imported via the Khunjerab Pass, the border between Pakistan and China.

The agreement was announced on Wednesday by Awais, along with the Gilgit Baltistan chief minister, Senator Saleem Mandviwala, and representatives of the trader association in a press conference. He said the federal government has agreed not to collect Sales Tax, Income Tax, and Federal Excise Duty on goods imported through the Sost Dry Port, provided they are meant exclusively for consumption within GB.

The decision, he said, will directly benefit the GB population.

The FBR chairman confirmed that while federal taxes will be waived, the Customs Department will collect duties on imported items in accordance with applicable laws. He emphasized that the exemption applies only to eligible imports made by local firms owned by indigenous GB residents, and only on goods listed in a positive tariff schedule, which was jointly developed by federal and GB authorities.

According to the agreement, the total value of annual tax exemptions will be capped at PKR 4 billion, and a first-come, first-served digital quota system will be implemented through Pakistan Customs’ WeBOC system.

The GB government will be responsible for verifying and authorizing importers and managing quota allocations in coordination with federal authorities. To ensure transparency, complete details of tax-exempt imports, including importer names and product categories, will be published on both FBR’s and the GB government’s official websites.

The agreement also includes strict compliance and enforcement measures. Traders will be required to file accurate goods declarations, and any misdeclaration or unauthorized resale of goods outside GB will result in penalties.

The customs authorities will retain the right to take legal action in such cases. Moreover, the tax exemption scheme will be reviewed every two years, or sooner if needed, based on the recommendations of the GB Government and recognized trade bodies.

In case of any disagreements regarding the implementation of the agreement, parties will first seek resolution through mutual consultation and negotiation. If unresolved, disputes may be referred to arbitration under the Arbitration Act of 1940.

The signing of the agreement also paves the way for the clearance of previously stuck consignments at the Sost port, a long-standing grievance of the local trading community.

The resumption of operations at the strategically located Sost Dry Port, a key hub in Pakistan-China trade under the China-Pakistan Economic Corridor (CPEC), is expected to significantly boost local commerce and economic activity in the region.