Is section 148 import tax a minimum tax, and why does a commercial importer pay more than a manufacturer importing for its own use?

What does the law say?

Section 148(7) of the Income Tax Ordinance, 2001 says the tax required to be collected under section 148 “shall be minimum tax on the income of the importer arising from the imports”. The same sub-section then switches this off for one case: it “shall not apply in the case of import of goods on which tax is required to be collected under this section by an industrial undertaking for its own use”.

Section 148(7A) overrides that carve-out for four kinds of goods. “Notwithstanding anything contained in sub-section (7)”, the tax is minimum tax on the income of every person arising from imports of:

1. edible oil;
2. packaging material;
3. paper and paper board; or
4. plastics.

The Board, with approval of the Minister in charge, can add to, omit from or amend that list by notification.

So who pays a minimum tax and who pays an adjustable one?

Importer and goods	Status of section 148 tax
Commercial importer, any goods	Minimum tax on import income, section 148(7)
Any other importer that is not an industrial undertaking importing for own use	Minimum tax on import income, section 148(7)
Industrial undertaking importing for its own use, goods outside the section 148(7A) list	Not minimum. It is advance tax, credited under section 168
Anyone importing edible oil, packaging material, paper and paper board, or plastics	Minimum tax, section 148(7A)

Section 168(1)(b) treats tax collected under Division II of Part V of Chapter X, which is where section 148 sits, as “tax paid by the person from whom the tax was collected”. Section 168(2) then allows a tax credit for it against the tax due on taxable income for that year. For the industrial undertaking in row 3, that is how the tax is adjusted. Section 168(3) lists final taxes that get no credit; section 148 is not among them.

Why does a commercial importer pay a higher rate?

Part II of the First Schedule sets two rates for goods in Parts II and III of the Twelfth Schedule, one general and one “in case of commercial importer”:

Goods	General rate	Commercial importer
Part I of the Twelfth Schedule	1%	1%
Part II of the Twelfth Schedule	2%	3.5%
Part III of the Twelfth Schedule	5.5%	6%

All rates are on the import value as increased by customs duty, sales tax and federal excise duty. The Ordinance states the higher rate but does not state a reason for it, and it does not define “commercial importer” in section 148 or in Part II. This page does not guess at the policy.

The second proviso to section 148(1) also gives manufacturers a possible route to the lower Part II rate. Where goods in Part III are used both as raw material and as finished goods, the Board may by notification treat goods imported by a person “as raw material for its own use” as classified under Part II, subject to conditions. Any such notification is outside this corpus.

Worked example (illustrative figures)

Two businesses each import Part III goods with a value, increased by customs duty and sales tax, of Rs. 10,000,000. Both are on the active taxpayers’ list.

Khan Traders, Karachi, imports for resale.

1. Commercial importer rate for Part III: 6%.
2. Tax collected: Rs. 10,000,000 x 6% = Rs. 600,000.
3. Under section 148(7) this is a minimum tax on the income from those imports.

Mehran Fabrication (Pvt) Ltd, Hyderabad, an industrial undertaking, imports components for its own production.

1. General rate for Part III: 5.5%.
2. Tax collected: Rs. 10,000,000 x 5.5% = Rs. 550,000.
3. Section 148(7) does not apply to it, so the Rs. 550,000 is advance tax. Under section 168(2) it is a credit against the company’s tax on its taxable income for the year.

If Mehran instead imported plastic sheets for its own packaging line, section 148(7A) would make the Rs. 550,000 a minimum tax on income arising from those imports, even though Mehran is an industrial undertaking importing for its own use.

The difference in collection between the two businesses is Rs. 600,000 - Rs. 550,000 = Rs. 50,000, but the bigger difference is in status: minimum for one, adjustable for the other.

What if an industrial undertaking resells part of what it imported?

Section 148(7) excludes imports “by an industrial undertaking for its own use”. It does not say how goods that were declared for own use and later resold are to be treated. The law is silent on this in section 148, and this page does not fill the gap.

Common mistakes

• Treating the commercial rate and minimum status as the same rule. The rate comes from Part II of the First Schedule; the minimum status comes from section 148(7) and (7A).
• Assuming every manufacturer escapes minimum tax. Section 148(7A) catches edible oil, packaging, paper and paper board, and plastics for every importer.
• Assuming only traders pay minimum tax. A non-industrial business importing equipment for its own use is not within the section 148(7) carve-out.

What to check in the official text

Read section 148(7) and (7A) in full, and section 168 for credits. Read Part II of the First Schedule and the Twelfth Schedule in the official PDF, since the site copy leaves out schedules. Check for Board notifications amending the section 148(7A) list or moving raw material from Part III to Part II; those are outside this corpus.