Government may raise customs duty to 2 percent

The government may replace the existing one percent duty slab with two percent in budget (2015-16), raising customs duty from one to two percent on many items subjected to lowest duty slab under Pakistan Customs Tariff (PCT). Sources said that the Federal Board of Revenue (FBR) was working out the revenue impact of possible increase in the customs duty from one percent to two percent on items presently subjected to one percent duty.
It is also being examined whether replacement of one percent slab to two percent would create any anomaly in the customs tariff. If this proposal is implemented, it would be major revenue generation measure on the customs side besides withdrawal of concessionary/exemption statuary regulatory orders (SROs) in coming budget. It is estimated to collect over Rs 8 billion from replacement of slab from one to two percent.
In budget (2014-15), zero percent duty slab in the tariff was substituted with one percent. However, items considered socially sensitive are maintained at zero percent through inclusion thereof in Part-IV of the Fifth Schedule to the Customs Act. If any decision has been taken to substitute one percent duty with 2 percent, the same policy of maintaining zero percent duty on socially sensitive items would be maintained in next fiscal year.
A number of small and medium sectors and industries are importing their primary raw materials at the concessionary rate of customs duty. The small industries were enjoying tariff protection upto 5 percent through lowest slab of zero percent. In last budget, zero percent slab was replaced with one percent. If one percent is now replaced with two percent, only tariff protection of three percent would be left for small industries operating in the country. The import of basic raw materials at the rate of two percent customs duty would reduce the level of protection available to local industries, they added.