Miftah assures Motiwala-led body over removal of budget anomalies

KARACHI: An anomaly committee constituted by the Ministry of Finance under the chairmanship of Zubair Motiwala held its meeting in Islamabad. Finance Minister Miftah Ismail joined the meeting along with FBR Chairman Asim Ahmed just before its conclusion.

The meeting was attended by Member (Customs-Policy) FBR Surraiya Ahmed Butt and Member (IR-Policy) FBR Afaq Ahmed Qureshi along with Businessmen Panel Chairman Mian Anjum Nisar, KCCI President Muhammad Idrees, Islamabad Chamber President Shakeel Muneer, Overseas Investors Chamber of Commerce & Industry (OICCI) President Ghiyas Khan, Pakistan Business Council CEO Ehsan A Malik, Quetta Chamber Vice President Amjad Siddiqui, OICCI Secretary General Abdul Aleem, Syed Asad Ali Shah, who represented Mutual Funds & Insurance Sector, representatives of Marbles Association and others while rest of the anomaly committee members also joined the meeting via Zoom.

The committee discussed threadbare all the anomalies arising out of recently announced federal budget and each of the following points were discussed in detail: Rate of 1% Withholding Tax (WHT) was applicable on industrial imports of polymers and polyester filament yarn whereas WHT has been proposed to be increased from 2% to 4% tax under Final Tax Regime for commercial importers which is a sheer discrimination.

The difference between trade and industry should not be more than 1%. Hence, WHT on commercial importers may please be kept intact at 2% with FTR under SRO 1125. It was unjustified to impose 3 percent Value Added Sales Tax on commercial import of plastics and polyester yarn which may be withdrawn. 17 percent Sales Tax imposed on cattle feed made from agricultural waste PCT Code 2308.0000 Pulses Husk Waste for cattle feed & PCT 2306.9000 Palm Kernel Cake/ Expeller needs to be withdrawn as it was only used to feed milking heads.

In order to enhance the exports, it is imperative to revive SRO. 1125 in its true spirit and reintroduce system of no payment and no refund of Sales Tax for the five export-oriented sectors. 20% regulatory duty was imposed on Soda Ash which needs to be withdrawn as this is the basic raw material for value added export-oriented industry. Rate of duty on Import of Flavors was reduced to 3% from 11% for snack manufacturers which needs to be brought to previous level of 11%.Although withdrawal of Sales Tax on Solar Panels was very graciously announced by the Prime Minister but the other components required for operationalising solar panels were still loaded with Sales Tax which was identified as an anomaly that needs to be removed. Indenting Commission is an important source of earning foreign exchange so it may essentially be treated as export proceeds and at par with other export proceeds. Under Clause 5 (29) B of Finance Bill, Plastics, Edible Oil, Packaging Material and Paper have been excluded from FTR which is discriminatory.

Hence, FTR may be extended to these items as well. The entire Jewellery retailers have been added to Tier-1 retailers which need to be reviewed and the jewellery sector should be allowed under Final Tax Regime. Since Sales Tax exemption is allowed on bread to all others, the same should be extended to bread and rusk when sold by Tier–1 retailers. Furniture shops/showrooms, which are neither part of a national or international chain of stores nor located in air- conditioned malls, should be excluded from the category of sub-section of 43-A of Section 2 of the Sales Tax Act, 1990.

All small furniture shops/showrooms may be declared as a cottage industry (5AB) and the condition of covered area may be removed and small furniture retailers may be brought into the category of fixed tax. It will protect the artisans/laborers/owners of furniture shops/ showrooms from further harassment and their business will be safe in addition to preserving the hand-crafted trade throughout the country. Although the requirement of CNIC for supplies to Unregistered persons has been waived under relevant Clause of the Finance Bill but the said clause in Finance Bill and relevant provisions in Sales Tax Act’ 1990 may suitably be amended to clarify several reservations regarding the requirement pertaining to provision of details about unregistered buyers and 3 percent further tax. Anomalies in tariff on black tea may also be removed and exemptions given to certain areas need to be withdrawn which would not only beat the menace of smuggling but would also discourage misuse of Afghan Transit Trade. 20 percent Regulatory Duty and 6 percent Additional Customs Duty on Pencils and 30 percent Regulatory Duty on precision wire for manufacturing staples may please be removed. 17% tax on Ships and boats should be immediately withdrawn and the status of zero duty/ exemption should be restored as per the ratified National Shipping Policy 2001 which was valid till 2030.

As ban imposed on import of luxury items was for a temporary period hence, it needs to be lifted and imports may be controlled through tariff rationalization. Section 8B restricts input tax adjustment to the extent of 90% of the Output tax.

At present, this provision is not applicable in case monthly exports are more than 50% of total sales. Yarn traders are not allowed to claim refunds before 14 months which is a gross injustice and needs to be brought at par with other traders.

The implementation of SRO 598 (I) 2022, banning certain items, may kindly be extended until 31st July 2022, so as to allow the consignments in pipeline to get cleared from Customs. There is a need to rationalize tariff of auto parts which were not being manufactured in Pakistan but prone to smuggling.

Hence, duty on auto parts should be imposed as per the specification of auto part and not on the basis of which vehicle it will be used for. Due to concessions given to Fata/Pata the cost of steel bars is almost 40% less than entire Pakistan which needs to be rationalized to provide a level playing field to locally manufacturers of steel. Since airlines have stopped any kind of commission to travel agents, it was recommended to treat the travel agent at par with small traders and they may be brought under FTR and charged on the basis of percentage of electricity bills. Imposition of 30% Regulatory Duty on import of High carbon steel wire rods needs to reversed as they are imported as raw material to produce high-quality products.

Income tax rate needs to be reduced to 2% on the import of PVC Electric Insulation Tapes. Marble sector needs to be treated at par with steel re-rollers and allowed fixed tax through electricity bills. In case of Mutual Funds, tax credits given under section 62 & 63 of the tax ordinance will not affect the revenue collection so the same may be brought to the previous position. Regulatory duty needs to be withdrawn on Hydrogen Peroxide as it is the basic raw material for any kind of process value added textile and other allied industries. Knitting oil is charged with 26% duty rate which needs to be brought down to the level of spinning oil. Weaving industry is suffering because of low rate of duty on import of woven fabric and needs further support to run the current capacity and enhance the same.

The duty on Bopet Film has been reduced to 16%. It was requested that the previous rate of 20% should not be reduced.

The locally produced coal was allowed the minimum selling price without any input adjustment amounting Rs. 2500/- which has been withdrawn in the current finance bill.

This needs to restored at the same is being used in the brick kiln and the bricks are used in the construction sector. As Rs17 billion allocated to promote IT sector are insufficient for achieving the ambitious IT exports target of $15 billion, this allocation may be raised in between Rs75 billion to Rs100 billion. Beside these many other relevant anomalies and critical issues were put up by FPCCI, OICCI, PBC, chambers of commerce & industry of Karachi, Islamabad, Quetta and several other associations. Chairman Businessmen Panel Mian Anjum Nisar, while commenting on the overall economic scenario, highlighted some glaring anomalies and the same were taken care of and accordingly compiled.

All these and many other measures were discussed and the Finance Minister Miftah Ismail, who joined the meeting along with Chairman FBR Asim Ahmed just before its conclusion, was requested that these are the hurdles in way of progress of the industry and must be addressed on top priority.

Regardless of the issues arising out of budget or the previous supplementary budget of January 2020, these have created a lot of problems therefore, the members of the committee requested to remove them.

The Finance Minister, after discussing some important points, assured that the Ministry of Finance will try to accommodate 95 percent of the anomalies pointed out by the committee.

Copyright Business Recorder, 2022