Duty-free import of Polypropylene bags: Finance starts inquiry against lobby in FBR

The Finance Ministry is reported to have initiated investigation against a lobby in the Federal Board of Revenue (FBR) which is supporting import of polypropylene (PP) bags, without duty, it is learnt. The probe has been started after a letter was written by polypropylene manufacturers association to the Advisor to Prime Minister on Finance, Shaukat Tarin.
The main objective of the inquiry will be to assess the quantum of PP bags cleared under SRO 1065(1) 2005 since October 20, 2005, and the resulting revenue loss, sources said. The Association is of the view that the Collectors of Customs were in partnership with the importers as they allowed import of PP bags without payment of duty.
"We draw your attention towards serious violation of conditions (iv), (ix) and (x) of SRO 1065(I)/2005 by the Collectors of Customs, whereby duty-free finished PP bags are cleared without the payment of customs duty in complete violation to the condition (xvii) that states if prima facie it is established that any entry is in violation of any of the conditions of this notification, the Collector of Customs has to refuse entry of goods without the payment of customs duty. Contrary to this, PP bags were cleared without the payment of customs duty," the Association wrote in the letter.
There are 200 PP industries, employing 150,000 workers and contribute to the national revenue by paying customs duty, sales tax and other provincial/federal taxes. The local industry claims that it has lost not only the market share due to release of imported PP bags without payment of duty but has also caused massive losses to the FBR by allowing duty drawback at 3.41 percent to the exporters under SRO 212/2009.
"We have been pursuing the case since the issuance of the said notification, and despite support given to the local manufacturers by the Ministry of Industries, Engineering Development Board (AEDB) and Board of Investments (BoI) nothing concrete has resulted yet," sources said, and expressed concern that this lack of action was in spite of all concerned Ministries' support for the local industry.
The National Tariff Commission (NTC) has also conceded the validity of the viewpoint of local PP manufacturers, stating that apparently bags are being cleared in violation of the condition outlined in the clause (xvii) of the notification.
NTC's decision indicates that illegal PP bags imports have created a monopoly to the detriment of the local PP industry. The Association has urged to the Advisor to Prime Minister on Finance to impose complete ban on import of duty-free PP bags to ensure that the domestic PP industry continues to contribute towards GOP the much desired revenue.