The government is all set to re-impose custom duty, additional custom duty and sales tax on imported cotton from August 1, 2019 (tomorrow), well-informed sources told Business Recorder. Cotton produced in Pakistan, is largely, consumed by 450 textile units across the country which contributes to export earnings of the country. Areas under cotton cultivation in Pakistan have witnessed a persistent decline over the last few years mainly because of turnover advantage and support price of other commodities.
Pakistan produces around 13 million bales of cotton and imports about one million bales to meet the gap between consumption and production. Around 1-1.5 million bales Extra Long Staple (ELS) cotton per annum is also imported at any production level, as this quality is not produced in Pakistan.
The government withdrew custom duty, additional custom duty and sales tax on the import of cotton on January 31, 2019 which ended on June 30, 2019. Resultantly, 2,439,170 bales were imported during July 2018 to June 2019 and the local cotton prices went down from Rs 9410 per maund in November 2018 to Rs 9241 per maund in March 2019.
Cotton production in 2018-19(9.98 million bales) has witnessed 16 per cent decrease relative to last year (11.98 million bales in 2017-18). However, for the year 2019-20, the government has fixed an ambitious target. In this backdrop, it is apprehended that if import of cotton continues to be facilitated, it might create an imbalance in cotton stocks. This in turn, is anticipated to exert a downward pressure on cotton prices in the beginning of the cotton season. Sowing of new crop has also been affected due to accelerated imports.
National Assembly Special Committee on Agriculture headed by Speaker National Assembly, in its meeting held on June 22, 2019, realized this issue and endorsed the imposition of duty on import of cotton prior to cotton sowing. Moreover, National Assembly passed a resolution on April 30, 2019 that "federal government should, without any delay restore the regulatory customs duty on cotton import to prevent the massive import and dumping of cotton and set minimum support price for cotton to protect the local farmers and encourage cotton cultivation in the country".
It was further added that export oriented units can claim duty paid on imported raw material under Duty and Taxes Resumption (DTRE) scheme. In reality, duty free import is only affecting local cotton prices and has no impact on textile exports.
The ECC, in its meeting held on January 15, 2019 decided to re-impose the duty and sales tax on the import of cotton effective from July 1, 2019 which was further delayed for one month by the ECC in its meeting held on June 25, 2019 and asked Ministry of National Food Security and Research to re-submit the summary of cotton with effect from August 1, 2019.
The Ministry therefore proposed that custom duty, additional custom duty and sales tax withdrawn on January 30, 2019 @ 3 per cent, 2 per cent and 5 per cent respectively, may be re-imposed on the import of cotton with effect from August 1, 2019.
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