FY16: Businesses to suffer as govt considers SROs’ withdrawal

Comprehensive plan chalked out to end preferential treatment .

ISLAMABAD:

In a major policy decision, the government may withdraw concessionary custom duty rates on the import of raw material for over 60 sectors including livestock, poultry, fertiliser and textiles from July this year, which will significantly increase their input cost.

The government is also considering levying Rs120-per-kg plus 5% customs duty on import of silver and Rs2,500-per-kg plus 5% on the import value of gold. Imports meant to cater to the renewable sources of energy sector and power generation through nuclear energy could also be subject to 5% duty. Equipment imported by technical, research and educational institutes has also been proposed to be charged in the range of 5% to 25% as against nil duties.

These sectors are currently protected under the fifth schedule of the Customs Act of 1969 and the government has dished out a comprehensive plan to withdraw preferential treatment in the upcoming fiscal year.

The move will open sectors for new entrants but will also carry adverse implications for the end-consumer price of these products. The concessions in custom duty rates for 66 sectors could be withdrawn, said sources in the Federal Board of Revenue (FBR).

During the first seven months of the current financial year, the accumulative raw material and machinery imports by these sectors amounted to Rs140 billion, according to the FBR.

The government will phase out another one-third Statutory Regulatory Orders (SROs) from the next fiscal year, said Finance Minister Ishaq Dar. The government intends to generate revenue of Rs120 billion through this withdrawal, said the sources.

Livestock and poultry

The government may withdraw concessionary rates on imports of 17 items being used by the poultry and livestock sectors. It has proposed to double the duty rates on soybean meal and poultry vaccine from 5% to 10%. From July through February, the country imported Rs26.4 billion worth soya bean meals.

The custom duty rates for growth promoter premix, vitamin premix, choline chloride, cattle feed premix, fish feed, poultry feed preparations, calf milk replacer and vitamins are proposed to be fixed at 20% from the current 5%. Furazolidone (feed grade) rates are proposed at 25%.

Fertiliser industry

Half a dozen inputs of the fertiliser industry may see at least a 100% increase, which will increase the cost of an important component of the agriculture sector. It has been proposed to enhance duty rates from 0% to 5% on imports of phosphoric acid, pesticides and all kinds of herbicides. For other insecticides, duties have been proposed to be enhanced from 0% to 20%. The total imports of all these items stood at Rs21.5 billion in the first seven months of the fiscal year.

Textile sector

Almost two-dozen critical inputs of the textile sector, including chemicals, may see an increase as well. Polyamide rates may increase from 3% to 5%, wool yarn and fine animal hair from 9% to 10%, sewing thread of synthetic filaments, artificial filament and monofilament from 9% to 10%. The CD rates on import of staple fibre may go up from 6.5% to 10% and on artificial staple fibres from 9% to 10%. The estimated imports of these inputs amounted to Rs30 billion in just seven months.

The government may withdraw 10% concessionary rate on the import of machinery and equipment by an industrial concern and may fix it at 25%. The cool chain machinery import rates may also go up from 5% to 25%. Karachi Shipyard and Engineering Works imports could also go up to 25% as against the current 0%.

The imports of machinery, equipment, apparatus by hospitals, medical and diagnostic institutes may see 25% duty against the current rate of 15%. Items imported by call centres and business-outsourcing facilities are proposed to be charged at 25% against 15%.

Published in The Express Tribune, May 12^th, 2015.

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