[Ask the Tax Whiz] Clarifying some tax issues related to ONETT transactions

ISLAMABAD: Pakistan’s trade deficit increased by 26% during the first month of the fiscal year 2026-27, mainly driven by a sharp rise in imports, according to the latest data released by the Pakistan Bureau of Statistics (PBS). The widening gap between imports and exports highlights growing pressure on the country’s external trade position at the beginning of the new fiscal year. Imports increased by around 19% in July, with higher purchases recorded across several major categories, including food products, machinery, transport equipment, textiles, agricultural inputs and metals. According to the PBS data, the country’s food import bill reached $805.4 million in July 2026, equivalent to more than Rs224 billion. The increase reflects continued reliance on imported food products and essential raw materials to meet domestic demand. Among food items, imports of milk, cream and food products prepared for infants rose by 25% to $18.7 million. Pakistan also imported significant quantities of spices, soybeans, palm oil and pulses during the month. Sugar imports were also recorded during July, with the country importing around 112 metric tonnes, adding to the overall food import bill. Machinery imports rise sharply Machinery emerged as one of the major contributors to the increase in the import bill. Machinery imports jumped by 41% to $1.31 billion during July compared with the corresponding period. The increase covered a wide range of equipment used in key sectors of the economy. Imports included machinery for power generation, offices, textile manufacturing, agriculture, construction and telecommunications. The rise in machinery imports could indicate increased demand for equipment and investment-related goods across different industries, although it also contributed significantly to the expansion of the overall trade gap. Vehicle imports register strong growth Imports of transport equipment, including vehicles, also witnessed substantial growth during the month. The import bill for the category increased by 40% to $420 million. The increase in vehicle and transport-related imports added further pressure to the country’s import expenditure, particularly as several other major import categories also recorded double-digit growth. Textile-related imports increase Pakistan’s textile sector also recorded higher imports during July. Imports of textile-related products, including raw cotton, increased by 15% to $680 million. The rise in raw cotton and other textile inputs indicates continued demand from the country’s large textile manufacturing and export industry. Since the textile sector remains a major contributor to Pakistan’s exports, higher imports of production inputs can also be linked to industrial activity. Agricultural inputs and chemicals Imports of agricultural machinery, equipment and chemicals increased by 23%, taking the combined import bill for the category to more than $1 billion. The increase comes as demand remains high for inputs and equipment required by the agriculture sector. Higher imports of such goods can support domestic production but simultaneously add to the country’s foreign exchange requirements. Metals import bill also rises The country also witnessed a significant increase in imports of metals, including gold, iron and steel. Imports under the category increased by around 23%, while the import bill for precious metals alone crossed $730 million. The broad-based rise across food, machinery, transport, textiles, agricultural inputs and metals suggests that the increase in imports was not confined to a single sector. The latest figures indicate that controlling the trade gap will remain an important challenge for policymakers during the new fiscal year. While higher imports of machinery, industrial inputs and agricultural equipment may support economic activity, a sustained increase in imports without a corresponding rise in exports could place additional pressure on Pakistan’s external account.

The nationwide strike by goods transporters has entered its sixth consecutive day after negotiations with the federal and provincial governments failed to produce a breakthrough. President of the Goods Transporters Association Nabil Mahmood Tariq said the talks had reached a deadlock, with no agreement reached on the key demands of the transport sector. He warned that the strike would continue indefinitely unless the government addressed the concerns raised by transporters. Speaking to Geo News by telephone, Nabil Mahmood Tariq said the negotiations failed because of what he described as the government’s rigid stance. According to him, transporters are particularly concerned about frequent changes in diesel prices, which they say make it difficult to manage transportation costs and business operations. He said the government had also refused to reduce toll taxes or guarantee that existing toll rates would remain unchanged for at least one year. Transporters have maintained that rising operating expenses, including fuel and toll charges, are putting increasing pressure on the sector. The association president said the government had offered limited concessions on customs-related matters and axle-load restrictions, but the proposals were not sufficient to end the strike. He further alleged that authorities had not yet fully assessed the economic consequences of the ongoing shutdown. According to him, the impact would become more visible in the coming days if the dispute remained unresolved. The strike has already begun affecting the movement and supply of essential commodities in several parts of the country. Disruptions in the transportation of fruits and vegetables have raised concerns about shortages and further increases in prices. In Balochistan, the strike has reportedly contributed to higher prices of several food items. In Quetta, for instance, the price of chicken meat has increased from around Rs500 to Rs550 per kilogram amid supply disruptions. Meanwhile, efforts are continuing in Karachi to maintain the supply of vegetables through smaller vehicles. However, transport-sector representatives warn that such arrangements may not be sufficient to meet normal market demand if the strike continues for an extended period. The prolonged protest has raised concerns among traders, consumers and businesses that rely heavily on road transportation. Any further delay in resolving the dispute could increase pressure on supply chains and potentially push up the prices of essential goods.