The Economic Coordination Committee (ECC) of the Cabinet has directed the Federal Board of Revenue (FBR) not to put up any textile-related issue without prior consultation with the Ministry of Textile Industry, official sources told Business Recorder.
The ECC issued these instructions while discussing cases referred to the tariff anomalies committee headed by FBR Chairman Abdullah Yusuf. He briefed the ECC about the procedure adopted and recommendations finalised by the tariff anomalies committee regarding 30 cases received from different quarters.
While recognising that only two of these cases were covered under the category of tariff anomaly, the committee deemed it appropriate to recommend certain changes in the rate of duty and Statutory Regulatory Orders (SROs) in the case of 16 representations so as to rationalise the tariff and provide further incentives to the industry.
The committee considered all these individual cases and recommended amendments in tariff schedules which were later approved by the ECC, except one case. The proposal regarding change in tariff on import of domestic sewing machines and viscose filament yarn/nylon yarn generated analytic discussion.
Sources said that impact of the proposed change on domestic industry in the context of the value-addition was discussed at specific length. They said that Gujranwala Art Silk Yarn Merchants Association had asked for reduction in duty on viscose filament yarn and nylon yarn.
The government had increased duty on viscose filament yarn and nylon yarn from 7 percent to 9 percent which the association believe would adversely affect the small cottage industry facing tough competition from the imported fabrics from China and moreover viscose filament yarn and Nylon yarn are also not manufactured locally, hence no question arises of local industry protection. They have requested to decrease the duty from 9 percent to 5 percent.
This is not a case of budget anomaly. In 2007-08 budget, it was decided to increase rate of duty on all manmade yarns from 7 percent to 9 percent. The present rate of duty on these yarns is in line with the rate of duty levied on all other manmade yarns like polyester filament yarn. However, viscose and nylon yarns are also not manufactured locally; therefore, it is proposed to reduce the rate of duty on nylon yarn to 7percent to restore pre budget rate. Recommended reduction duty on nylon yarn (5402.4500) to 7 percent to restore pre-budget rate.
In order to save the domestic sewing industry, Ghulam Sarwar Malik, Vice Chairman, Steering Committee for the Rehabilitation & Development of Sewing Machine Industry in Pakistan proposed to enhance the customs duty on sewing machines in CDK/SKD condition that has been lowered in the current budget.
In another representation, Chairman of sewing machine development committee stated that zero rating of sales tax on import of sewing machines would hurt the unregistered local manufacturers of sewing machines.
According to FBR, this was not a case of tariff anomaly; rather, it was a proposal to enhance the rate of duty from 5 percent to 10 percent on sewing machines in CKD/SKD condition. The rate of duty on sewing machine (CBU) is 20 percent, and 5 percent on CKD/SKD.
The lower rate for CKD/SDK is to encourage the local manufacturing. Duty structure on sewing machines in CKD/SKD has not been changed in the current budget. However, local supply of domestic sewing machines has been zero rated for sales tax purposes to bring it at par with the industrial sewing machines which were already zero dated. Therefore, both imported and locally manufactured sewing machines are at par and there is no anomaly.
The committee recommended imposing R.D @ 15 percent on sewing machines in SKD condition. (8452.1010). The ECC observed that inclusion of Secretary Textile Industry in the tariff anomalies committee would have contributed to more balanced recommendations.
Sources said that the ECC approved all the cases recommended by anomalies committee and at the same time advised the FBR to resubmit the case after obtaining necessary input from the stakeholders, including Ministry of Textile Industry. FBR was further directed to examine the issue relating to polyester staple fibre in consultation with the Ministry of Textile Industry and then bring it to the ECC of the Cabinet.
"FBR has been directed to include Ministry of Textile Industry Secretary in the tariff anomalies committee as well as any other committee where the subject of textile is involved," sources said.