ZAHEER ABBASI

ISLAMABAD: Ministry of Commerce has acknowledged that some tariff lines representing industrial inputs were also subjected to regulatory duty (RD), with the objective of curtailing import bill and thereby reducing pressure on balance of payments.

In background interviews sources revealed to Business Recorder that in view of the increasing pressure on balance of payments, a meeting of the Monetary and Fiscal Policies Coordination Board of the State Bank of Pakistan (SBP) decided to establish an inter-ministerial committee on tariff rationalization by including representatives from Finance and Commerce Divisions, SBP and PIDE to evaluate tariff structure that may curtail the widening trade deficit. The meeting decided that the Commerce Division should undertake tariff rationalization exercise.

The Commerce Division, sources stated, undertook a tariff rationalization exercise and suggested: (i) customs duty may be reduced on raw materials and intermediate goods that are imported under various FBR schemes including rebate, duty and tax remission scheme (DTRE), export orient units (EOU) and manufacturing bond (MB) – except the locally manufactured and consumer items. In addition to making the inputs cheaper, the proposed reforms would also address delays in payment of drawbacks and tax rebates in order to improve liquidity of the exporters. Furthermore, this would also remove bias against Small and Medium Enterprises (SMEs) that are unable to avail concessions available under Statutory Regulatory Orders (SROs); and (ii) to compensate for the revenue loss, tariffs on non-essential and consumer goods be increased to discourage widening imports.

Sources further stated that after discussions it was decided that tariff reduction on raw material and intermediate goods would be implemented after further consultations at a later stage of tariff rationalization exercise.

They added that to curtail imports of non-essential and luxury items, a joint exercise was carried out with FBR and Finance Division. Commerce Division proposed an initial list of items based on the following criteria: (i) RD may be applied on non-essential items and luxury goods whose import during the past three years has increased. RD on raw material and intermediate products should not be increased; (ii) RD may be applied on cascading basis to incentivize value addition; and (iii) RD may be applied to reduce tariff dispersion since high variation in tariff of similar items leads to issues of misclassification.

The Economic Coordination Committee (ECC) of the Cabinet on October, 16, 2017 approved the summary of Commerce Division dated October 5, 2017 for tariff rationalization on import of non-essential and luxury goods. Accordingly, FBR imposed RD on October 16, 2017 and consequently some tariff lines representing industrial inputs were also subjected to RDs.