The cabinet has approved the imposition of 10% regulatory duty on the import of petrol from China and exempted the shipments that have already been booked for import.
Earlier, the government came to know that there was zero duty on the import of oil under the China-Pakistan Free Trade Agreement (FTA).
Oil companies brought petrol from China under the FTA and got the benefit of over Rs22 billion in terms of tax exemption.
Imports of petrol had increased from China which raised concerns among the government circles. The Federal Board of Revenue (FBR) and the Ministry of Commerce took up the matter and held deliberations.
Petroleum secretary raised the matter in a recent cabinet meeting, pointing out that the Economic Coordination Committee (ECC) had imposed 10% regulatory duty on the import of petrol from China.
However, he requested the cabinet, chaired by Prime Minister Shehbaz Sharif, the levy should not be applied to the cargoes for which Letters of Credit (LCs) had already been opened or those which were in high seas.
The cabinet approved the proposal that the regulatory duty would not apply to those contracts for which LCs had already been opened and to the oil cargoes that were in high seas and were on the way to Pakistan.
Earlier, the Ministry of Commerce informed the economic decision-making committee that the National Tariff Policy 2019-24 stipulated that all proposals for levy, amendment or removal of tariffs shall be examined at the National Policy Centre and after approval of the Tariff Policy Board, shall be submitted to the cabinet or parliament, as the case may be, for consideration.
The ECC reviewed a summary submitted by the Ministry of Commerce titled “Levy of regulatory duty on import of motor spirit” and approved the proposal of imposing 10% regulatory duty.
It was stated that the FBR had approached the Ministry of Commerce with a request for the levy of regulatory duty on the import of motor spirit.
The FBR pointed out that the import of motor spirit under HS Code 2710.1210 was subject to 10% customs duty under the Fifth Schedule of the Customs Act 1969, but it was subject to 0% duty under the China-Pakistan FTA.
During fiscal year 2021-22, the customs duty on motor spirit was increased from 5% to 10% on the recommendation of Ministry of Energy (Petroleum Division).
However, due to the waiver from customs duty under the China-Pakistan FTA, in the current financial year, some of the oil marketing companies (OMCs) stepped up the import of petrol from China.
Such imports increased from Rs30 billion in the previous financial year to Rs232 billion in the current year, showing an increase of 673%.
Those availing themselves of the FTA exemption pay no customs duty while others pay 10% duty. The revenue impact of this exemption in the current financial year is estimated at about Rs22.5 billion.
The FBR also took up the issue with the Ministry of Energy (Petroleum Division) and proposed the imposition of 10% regulatory duty on the import of motor spirit, where the customs duty was zero.
The Ministry of Commerce said that in order to address the anomaly, the issue came up for discussion in the 39th meeting of the Tariff Policy Board held on February 28, 2022.
After thorough deliberation, it was proposed that regulatory duty at the rate of 10% may be levied on the import of motor spirit. However, the imports on which 10% customs duty was paid would be exempt from the regulatory duty.
Published in The Express Tribune, June 17th, 2022.
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