Second-Hand Clothes Get Pricier: 10% Tax Collection Begins in New Fiscal Year
As Pakistan enters the new fiscal year 2025–26, low-income households are bracing for yet another economic jolt—this time from a less-expected corner. Second hand clothes, a staple for millions of working-class citizens, are now subject to a 10% sales tax, making them significantly more expensive and drawing criticism for disproportionately impacting the country’s poorest communities.
A Tax on the Poor’s Wardrobe
Often referred to as “lunda bazaar” items, second-hand clothes are imported in bulk from Western countries and sold at affordable rates across Pakistan. From urban cities like Karachi and Lahore to rural towns and villages, these clothes have long been the go-to option for those unable to afford new garments. With inflation on the rise and incomes stagnant, many citizens had come to depend on second hand clothes not just for affordability but for durability and variety.
However, with the Federal Board of Revenue (FBR) implementing a 10% general sales tax (GST) on second-hand clothing as part of the broader fiscal tightening measures in Budget 2025–26, this affordability is under threat.
Retailers in local Lunda markets report that prices have already surged by 15–20% in anticipation of the new tax collection, which began on July 1. Items that once sold for Rs. 300–400 are now being priced at Rs. 500 or more.
Why Tax Second-Hand Clothing?
According to government officials, the tax is part of a strategy to expand the tax net and reduce reliance on external borrowing. As part of commitments made to international lenders like the IMF, Pakistan is expected to improve its domestic revenue collection by targeting previously untaxed or under-taxed sectors—including informal retail, second-hand imports, and unregistered markets.
The FBR argues that the second-hand clothing industry has grown to a multi-billion rupee sector and is no longer a “marginal” business. Imports of used garments are handled through formal channels and taxed at the port, but domestic resellers often operate without documentation. By implementing a flat GST, authorities aim to regularize the sector.
Public Backlash: ‘This Is A Tax on Poverty’
Unsurprisingly, the move has been met with strong criticism from economists, civil society members, and the public. Many view it as a regressive tax—one that hits the poorest the hardest. Unlike luxury goods or high-end fashion, second hand clothes are a necessity for many families earning minimum wage or living below the poverty line.
“This tax effectively punishes the poor for trying to clothe themselves,” said Rabia Hasan, an economic justice advocate based in Lahore. “Instead of widening the tax base among the wealthy elite or enforcing taxes on real estate and luxury imports, the state is taxing what little dignity the poor have left.”
In urban areas, shoppers have begun protesting outside large second-hand markets, calling for the government to reverse the decision. Social media campaigns under hashtags like #NoTaxOnLunda and #PoorLivesMatter have also gained momentum in recent days.
Retailers Feel the Heat
For traders and vendors, the tax means more than just lower sales—it threatens their very survival. Small business owners in famous markets like Landa Bazaar (Lahore), Raja Bazaar (Rawalpindi), and Lighthouse (Karachi) say they are already witnessing a sharp drop in customer turnout.
“We used to sell 100–150 items a day. Now, people walk in, look at prices, and walk away,” said Javed Malik, a vendor in Lahore’s Anarkali market. “Customers are angry, but we can’t help it. We’re also paying more to import and display the items.”
Some vendors worry that if the sales slowdown continues, they may be forced to shut down their stalls—leading to job losses and reduced income for thousands of daily wage workers employed in these markets.
Looking Ahead: Alternatives and Exemptions?
Amid rising criticism, experts are urging the government to consider exempting specific categories within the second-hand clothing trade—particularly children’s clothing, winter wear, or items priced under a certain threshold. Another suggestion is to impose the tax only on bulk resellers and importers, sparing small traders and end consumers.
The government has not yet announced any revision or relief. However, sources within the Ministry of Finance indicate that a review may take place after the first quarter, especially if revenue projections fall short or political pressure intensifies.
Conclusion
As Pakistan’s economic policymakers walk a tightrope between austerity and social welfare, the burden of revenue generation seems once again to have landed on those least able to bear it. While bringing more sectors into the tax net is important for long-term fiscal stability, doing so at the expense of basic human needs—like affordable clothing—may end up costing more in social unrest than it brings in through tax revenue.
Whether the government backtracks, modifies the tax structure, or sticks to its guns will reveal how committed it is to balancing economic reforms with social justice in an increasingly fragile economy.
Reference: نئےمالی سال میں لنڈے کے کپڑے بھی مہنگے،10فیصد ٹیکس کی وصولی شروع