Proposals for federal budget 2011-12: ministry suggests removal of Regulatory Duty

The Ministry of Commerce, in its proposals for the federal budget 2011-12, has suggested removal of Regulatory Duty (15-35 percent) on 400 different items, lived through various SROs during 2008-09, particularly in the manufacturing sector while tariff increases made in the budget 2008-09 have also been proposed to bring back to earlier positions except agriculture.
The Ministry has submitted its recommendations to the National Tariff Commission for seeking comments so that these could be forwarded to the Federal Board of Revenue prior to announcement of the upcoming budget, well informed sources told Business Recorder on Thursday.
The Ministry has put forward six proposals dealing with tariff and Regulatory Duty. During the Budget for 2008-9, tariff was increased on 360 tariff lines. Major increases were made in tariffs of various products from 20-25 percent and 30-35 percent. Subsequently, Regulatory Duty at 15-35 percent was also imposed on about 400 tariff lines that resulted in accumulative incidence of 50 percent on various products.
The Ministry has also suggested some proposals relating to simplification of tariff regime for the manufacturers of football bladders, poultry sector and surgical sector. Duty free import of raw materials of this sector was allowed under the SRO 567(1)/2006, dated 5th June, 2006 allowing a number of concessions which include; import duty was abolished on 8 tariff lines for the manufacture of football bladders with the condition of direct import by them and further certification by the Sports Goods Association.
Eleven imported inputs were allowed to the manufacture of poultry feeds without any condition. Besides, for the import of maize grains, a Deputy Secretary of Ministry of Food and Agriculture had to be authorised to determine annual requirement of the importers of poultry inputs. Similarly, for surgical sector, tariff was eliminated on 10 imported inputs, with the condition that Ministry of Industries will determine the requirement of the industry and Production and the imports are effected directly by the manufacturers.
It was observed that most of the manufacturers in the three sectors are in the category of SMEs thus they are unable to approach various Ministries to get their annual requirement ascertained and to import directly. They do not have the means to keep an inventory of inputs and would purchase them mainly on daily/weekly basis from commercial importers. Resultantly, the objectives of the policy to provide facilitation to these sectors have not been effectively implemented.
In view of this eight tariff lines, currently enjoying zero duty concessions, theoretically, have been proposed to be included in the ambit of zero tariff in the First Schedule of Custom tariff. The imported input for poultry feeds, 11 tariff lines may be completely exempted in the First Schedule which will have a positive effect for the development of this poultry industry for local consumption initially and exports subsequently. The Surgical goods are an important sector for diversification of the country's exports. However, the conditions of direct import by the small and medium enterprises is not possible thus the policy of providing facilitation has failed. In view of this, the Ministry has proposed to include 10 materials in the zero tariff regimes.
With a view to facilitate the gems and jewellery sector and realise its export potential, besides bringing the trade of these products in the legitimate regime, Sales Tax and With Holding Tax, on diamonds, precious stones, platinum and palladium has been proposed for the upcoming budget exemption of. Besides, zero duty has also been recommended to be indicated in Pakistan's Custom Tariff against the relevant tariff lines. Earlier, import duty was abolished on all these products on the Ministry of Commerce recommendations to encourage import of diamonds, precious stones, gold, silver, platinum, and palladium, as is evident in the SRO 567(1)/2006.
The imposition of Regulatory Duty and high tariff on imports is likely to be reviewed. Tariff was increased on 360 tariff lines in the budget 2008-9, while major increases were made in tariffs of various products from 20-25 percent to 30-35 percent. Subsequently, Regulatory Duty was also imposed on about 400 tariff lines at 15-35 percent that resulted in 50 percent accumulative impact on various products. The auto sector tariff has also been increased considerably by these measures.
Besides, in many cases zero or five percent Custom Duty is applicable to "respective beadings" which provides leverage to the subordinate staff at the Customs Stations to indulge in malpractice and compilation of correct statistics. With a view to ensure transparency, the Ministry has proposed to incorporate specific tariff lines in the notification.