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 ISLAMABAD: Traders in Pakistan’s northern Gilgit-Baltistan (GB) announced ending a two-month-long protest near the country’s border with China on Wednesday, after the federal government accepted their demands and announced significant tax exemptions for the region’s residents. 

GB’s importers, exporters, small traders, customs clearing agents and members of the area’s local chamber of commerce launched a sit-in protest in late July at the Sost dry port. Protesters demanded the government exempt traders from taxes as the semi-autonomous region was a “non-tariff” area and therefore should be exempt from sales and income taxes. 

The protest had brought trade between Pakistan and China via the northern Khunjerab Pass to a halt, with the movement of people also adversely affected. Prime Minister Shehbaz Sharif formed a committee on Aug. 17, headed by Energy Minister Sardar Awais Leghari, to resolve the crisis. 

Federal Bureau of Revenue (FBR) Chairman Rashid Mahmood Langrial explained at a news conference that previously, duties and consumption taxes used to be collected from GB traders at the Sost port near the border with China.

“While there is no consumption tax for GB, we did not have a mechanism to ensure that the exemption is offered only to the local population,” Langrial told reporters at the news conference. He was flanked by Leghari, GB Chief Minister Hajji Gulbar Khan and Senator Saleem Mandviwalla.

“Under the new mechanism, sales tax, income tax and federal excise duty will no more be collected at the border, but custom duty and regulatory duty will still be collected,” he added. 

As per the agreement, a copy of which is available with Arab News, the tax exemptions will only be offered to local firms registered with the GB government. The total amount of tax exemptions shall not exceed Rs4 billion [$14.34 million] per annum.

The GB government will now implement the agreement and ensure that its various clauses are implemented.

Ashafaq Ahmad, a leader of the region’s traders who is also the chairman of the GB Chamber of Commerce and Industry, welcomed the deal. 

“We are thankful to the government for granting us tax exemptions and hope the written agreement will be implemented,” Ahmad said. 

He called on traders to resume cross-border trade activities at the Sost border starting Thursday, expressing hope that the tax relief would rejuvenate commercial momentum and strengthen regional trade ties. 

Faizullah Faraq, GB chief minister’s spokesperson, told Arab News that the agreement would impact trade worth over Rs100 billion [$358.42 million] between Pakistan and China through the Sost dry port. 

He said last year, the government collected around Rs16 billion [$57.35 million] in taxes from the Sost border alone.

Speaking at the press conference, Mandviwalla said the prolonged protest had worried Pakistan and China. 

Pakistan’s trade with China is worth around $20 billion but the balance is heavily tilted in Beijing’s favor.

The commerce ministry this week told a parliamentary panel that Pakistan’s imports from China peaked at $20.8 billion in 2020–21, against exports of around $3.1 billion.

Ministry officials told the National Assembly Standing Committee on Commerce that figures from last fiscal year (2024-25) show that Pakistan’s imports from China stand at $17 billion against the country’s exports to Beijing, which were recorded at $2.7 billion. 

The committee voiced deep concern over Pakistan’s widening trade deficit with China and highlighted the need to shrink it through value addition measures and institutional reforms.