PHOTO: KPI
The Economic Coordination Committee (ECC) of the Cabinet deferred the summary after the commerce ministry opposed the move. The absence of the textile secretary was said to be another reason for the deferment. The finance ministry had not circulated the summary for comments of the concerned departments before it tabled the policy for the approval of the ECC.
The Ministry of Finance requested the ECC that the government should restore 5% customs duty and 4% sales tax on import of cotton, according to sources in the commerce ministry. The summary had been moved to generate an extra Rs10 billion revenue; by charging total 9% duties and taxes on imported cotton. The industry is compelled to import cotton due to shortfall of the commodity in the domestic market.
On January 10 of this year, Prime Minister Nawaz Sharif had announced the textile package in an attempt to boost exports that have been declining for the last four years. Under the package, sales tax, customs duty on import of textile machinery and cotton has been abolished.
However, the government’s decision to partially withdraw these incentives within three months of giving the package indicates growing fiscal constraints.
For the current fiscal year 2016-17, the government had assigned Rs3.621 trillion tax collection target to the Federal Board of Revenue (FBR). However, from July through March this year, the FBR has sustained a shortfall of Rs168 billion, which it blames on changes in tax policies after the budget.
During the current year, cotton production stood at only 10.54 million bales - which was 25% less than 14.1 million target set for this fiscal year. There is a minimum of three million bales shortfall that the industry will have to meet by importing cotton. The industry needs imported cotton until the next crop arrives.
However, the finance ministry moved the summary on the plea that the agriculture sector has started reviving therefore, there was a need to support it by making imports expensive.
In the last fiscal year, the industry had imported 2.6 million bales while the local production had been estimated at 9.7 million bales.
Exports plunged 3.1% to only $15.1 billion during July-March period of this year, which were $478 million less than the exports made in the comparative period of last year, according to the Pakistan Bureau of Statistics.
Resultantly, the trade deficit widened to $23.38 billion during July-March period of this fiscal year, which was 38.8% or $6.53 billion more than the comparative period of last year.
The ECC approved a proposal of the Ministry of Commerce with respect to the prime minister’s textile package, according to a handout of the finance ministry issued after the meeting. It added that the ECC gave an extension in deadline for submission of claims from 90 days after shipment to 120 days. The ECC also approved inclusion of certain finished leather products in the scheme of Drawback of Local Taxes and Levies (DLTL) under the textile package.
Other decisions
The ECC also approved payment of salaries amounting to Rs380 million for the month of January 2017 to Pakistan Steel Mills employees.
The ECC allowed issuing Letter of Comfort to National Bank of Pakistan or any other financial institution, which will in turn will issue Standby Letter of Credit (SBLC) for the comfort of commercial lenders to arrange finances for the Lahore-Sialkot Motorway project.
The committee also approved a summary to allocate of 10mmcfd gas from Tolang Gas field to SNGPL.
Published in The Express Tribune, April 15th, 2017.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS (1)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ