Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has suggested that the customs duty on all basic industrial raw materials that are not produced locally should be between 2 percent and 5 percent. It said that the locally manufactured raw materials should be reasonably protected according to the cascading principle. For this purpose, FPCCI proposed that customs duty on raw material, not produced locally, should be between 2 percent to 5 percent.
Besides, it suggested that the duty on import of finished products should be 20 percent and at least 10 percent effective protection rate should be available to the local industry against the imported finished product and for this purpose regulatory duty at the rate of 5 percent to 10 percent, where necessary, be levied. The customs duty on raw materials, which were locally produced, should be 10 percent to 15 percent, it proposed.
FPCCI noted that concessions and exemptions under various SROs, FTA and PTA with various regional countries had resulted in substantial loss of revenue and misuse of facility. Besides, it had also created anomalies in tariff, as the customs duty on finished goods if imported under FTA/PTA was lower than that of customs duty on raw materials even if imported under SROs, giving exemptions of duty for the manufacture of certain goods. In this way, it said that the cascading principle of customs duty structure had been ignored.
FPCCI noted that such concessions and exemptions had created distortion in the taxation system. "Imports have been diverted to FTA/PTA regime. Policy of import substitution has been set aside, while the local manufacturers of the products have been side lined."
FPCCI suggested that duty structure should be rationalised according to cascading principle ie duty and tax structure on raw materials should be lower than the finished products, including, those imported under FTA/ PTA regime. To protect local Chior-Alkali industry, it should be included in the sensitive list under Pak-China FTA. The import of all finished products under FTA at the rate of zero percent or 5 percent duty may be subjected to regulatory duty at the rate of 5 percent if not produced locally.
FPCCI pointed out that smuggling was eating vitals of the country's economic fabrics and needed to be curbed through fiscal and administrative measures. "It renders industrial products uncompetitive and discourages legal imports thus make colossal losses to the trade, industry and government exchequer. Despite efforts, the Federal Board of Revenue (FBR) staff with limited resources cannot control smuggling from borders of Iran and Afghanistan," it said.
FPCCI suggested that since the total elimination of smuggling only through administrative measures at the borders was difficult, the remedy lied in reducing incentives for smuggling by reducing the tariff rates on smuggling-prone items to the lowest possible level. The raw materials, particularly falling under SRO 565, be allowed to import at zero percent duty. "This will result in higher government revenue, provide impetus to local trade/industry and generate employment opportunities," the chamber observed. It further said that the list of smuggling-prone items with FBR might be revisited in consultation with FPCCI.
In the meantime, total impact of duties and taxes on the following items be reduced to the extent where the incentive for their smuggling was removed: ceramic tiles/porcelain tiles; coffee; tea; spices; electrical appliance & machinery; POL products; tyres; polyethylene and PP granule; steel products; sulphonic acid; mobile phones etc.
Whenever a dispute arises between importers and the customs authorities regarding classification, FPCCI suggested that their case might be referred to the Classification Committee of the Customs Department to get its opinion.
In the meanwhile, goods of the importers might be released provisionally after obtaining proper securities/pay orders. If there was no mis-declaration of description, and the dispute arose due to PCI Heading, then no penal action might be taken. In this regard, Clause 1(e) of the SRO 499(1)/209 might be amended. A representative of FPCCI should be included in the Customs Classification Committee, which should be further reactivated and hold regular/frequent meetings so that classification disputes were resolved expeditiously.