The Economic Co-ordination Committee (ECC) of the cabinet will consider a proposal of Investment Ministry to exempt capital goods from Regulatory Duty (RD), in its next meeting, in spite of stiff resistance by the Ministries of Finance, Industries and Federal Board of Revenue (FBR), sources close to Investment Minister, Waqar Khan, told Business Recorder.
The government imposed RD on 379 items on August 27, 2008. However, some foreign companies approached Investment Ministry regarding the effects of the SRO 896(1) 2008, on their investments.
The sources said investors were importing a large number of capital goods required for their businesses that had previously been allowed under concessionary tariff rates. With implementation of the new SRO concessionary rates of duty are no longer applicable on capital goods to be imported by the investors.
Concessionary duty rates were allowed under an earlier SRO 575(1) 2006 on June 05, 2006. Primarily, it allowed import of capital goods for agriculture sector including dairy, livestock and poultry at zero customs duty.
For a number of other businesses including wholesale/retail chains, manufacturing sector, Information Technology and IT enabled services, hospitals and medical centres duty rates of 0-5% were provided. The new SRO 575(1) 2006 additionally provided that no sales tax was payable on import of capital goods for agriculture sector, manufacturing, wholesale and retail chains and IT services.
At present, three retail chain store companies have requested Investment Ministry for waiver of RD levied under SRO of 2008 on goods earlier allowed under concessionary rates.
The sources quoted the companies as stating that imposition of RD has changed the feasibility of their projects and would likely impact on their decision to invest. Continued investment for the economy is critical, therefore, the Ministry has proposed that those capital goods that were allowed concessionary rates of customs duty and waiver of sales tax under SRO 575 of 2006 may be exempted from levy of RD imposed under the fresh SRO 896 of 2008.
Investment Ministry has promised that it would forward the list of such import items to the FBR for application of SRO 575(I)/2006 rather than SRO 896(1)/2008.
The sources said Investment Ministry had circulated its summary to the Ministries of Finance, Industries and FBR for comments. Finance Ministry is of the opinion that the summary should contain a detailed list of capital goods required to be exempted from levy of RD whereas FBR has suggested identifying sectors of SRO 575(I)/2006 for exemption.
According to sources, Industries Ministry has suggested that removal of RD should he conditional on the locally manufactured status provided in SRO 575(1)/2006.
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