Govt proposes gradual duty cut in new tariff policy

Makes public draft of the policy for feedback before formal approval

ISLAMABAD: The government has finalised the National Tariff Policy for the next five years as part of the Strategic Trade Policy Framework (STPF) 2018-23.

A draft of the policy, which will be applied from fiscal year 2018-19, has been made public and the government has invited feedback from all stakeholders before it is formally approved.

The draft recommends a gradual reduction in the duty on raw material and machinery imports for export-oriented industries. Tariff slabs are proposed to be fixed at 5%, 10%, 15% and 20%.

Currently, the four customs duty slabs are 3%, 11%, 16% and 20%. The lowest rate is charged on raw material and the highest on finished goods.

The reduction in tariffs with progressive stages of manufacturing is proposed to promote value addition. It proposes gradually pushing the tariff lines, currently in the 3% slab, to zero. However, reforms may be introduced in different phases to give time to the domestic industry for adjustment.

The draft policy also calls for simplifying the tariff structure and reducing distortions. In this regard, it has been suggested to merge the additional duty of 1% under SRO 1178(I)/2015 into customs duty and the respective tariff lines.



According to the Commerce Division, the draft policy will help make exports more competitive and facilitate participation of domestic manufacturers, including small and medium enterprises (SMEs), in global and regional value chains.

“The objective of the policy is to simplify and rationalise the existing tariff structure for enhancing the efficiency of domestic activities, especially in the manufacturing sector and simultaneously, to ensure predictability and transparency,” the ministry said in a statement issued on Saturday.

The new policy also calls for the elimination of difference in tariff rates for commercial importers and industrial users of raw material, intermediate goods and machinery in order to reduce the cost of production for the SMEs.

Furthermore, to make the protection mechanism predictable and facilitate investment decisions, it has been proposed to provide time-bound protection to nascent industries.

“Tariffs, being one of the instruments of the trade policy, play an important role in enhancing export competitiveness and productivity of domestic industries. Although Pakistan has liberalised its tariff regime since 2005, the tariff structure remains complex and needs to be simplified,” a spokesperson for the commerce ministry said.

The Commerce Division is formulating the STPF 2018-23, which will give strategic direction to the export sector for the next five years. The new tariff policy will be an integral part of the upcoming STPF.

The ministry has placed the draft on its website and has also shared it with all chambers and trade associations in the country, inviting feedback by April 27.

A consultative session with the stakeholders is slated for April 26 in Rawalpindi.

The draft policy, which has been finalised by the ministry and the National Tariff Commission, will be submitted to the Economic Coordination Committee (ECC) of the cabinet for approval after the consultation process.

Published in The Express Tribune, April 22^nd, 2018.

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