MUSHTAQ GHUMMAN

ISLAMABAD: Finance Minister Dr Miftah Ismail is expected to announce reduction in duty one step down on 303 tariff lines in his budget wind-up speech in the National Assembly; well-informed sources the in Federal Board of Revenue (FBR) told Business Recorder Monday.

The new list of 303 tariff lines has been finalised after threadbare discussion between the Finance Ministry, Commerce Ministry and the FBR at the weekend, the sources added.

“Local industry began suffering badly after adverse budgetary measures initiated by FBR since 2013.

The then Finance Minister Ishaq Dar started this move and instructed FBR to reduce/eliminate concessions available in duties and taxes. Several SROs and other relevant schedules were revised in this regard,” sources continued.

Commerce Ministry had sought reduction in tariff across all 515 tariff lines in the budget 2018-19 to enhance export competitiveness and productivity of domestic industries.

Explaining the one step down mechanism, the sources said, 20 percent custom duty will be lowered to 16 percent and 16 percent to 11 percent and three percent to zero respectively.

The financial impact of reduction in duty will be about Rs 12 billion.

The government has agreed to reduce duty on packaging material which is used for value addition to zero per cent. The financial impact of this step will be about Rs 10-12 billion.

Earlier, FBR only considered 104 tariff lines – mostly raw materials – by withdrawing the customs duty while reducing duty on another 28 tariff lines.

Last year, the FBR had slashed duty only on four tariff lines.

The sources said duty on some of the tariff lines related to textile sector has not been touched as the textile industry had raised objections.

According to sources, duration of Prime Minister’s exports package will also be extended so that the current trend of growth may continue.

The government has already devalued rupee to extend support to exports. The total financial impact of reduction in duty on 303 items, zero rating for packaging material and extension in Prime Minister’s exports package is estimated at Rs 50 billion.

Since last few years the Commerce Division is under severe criticism on increase in trade gap due to decline in exports and increase in imports including from China.

Realizing this fact and to discourage imports into Pakistan, the Commerce Division suggested imposition/revision of Regulatory Duty (RD) on steel, textile and other related products which not only includes finished goods but certain raw materials used by industries on which regulatory duty was increased.

Resultantly, anomalies were created in certain products where duty on raw materials became higher than the finished product due to which manufacturing sector suffered severely.

NTC has identified the inputs/raw materials of export oriented products to rationalize their tariff structure in order to make exports more competitive and facilitate participation of local manufacturers, including SMEs, in global and regional value chains.

In its proposal, Commerce Division had suggested not only a reduction in existing Customs Duty on these items but also suggested removal of Regulatory Duty on textile and steel related items imposed/increased vide SRO 1035(I)/2017.

Accordingly the Commerce Ministry tariff rationalisation will improve the competitiveness of the leading export sectors including textiles, apparel, leather, spices, chemical products, plastics and articles thereof, iron and steel.