Pakistan brings back sales tax, Customs duty on cotton imports

ISLAMABAD: The government will impose a four percent customs duty and five percent sales tax on cotton import by the middle of July, a statement said on Tuesday, reinstating the tariff after a gap of nearly seven months in response to recent large purchases from overseas.

“On a proposal by the Finance Division, the ECC (The Economic Coordination Committee) of the Cabinet)) approved the restoration of import duty and sales tax on import of cotton with effect from 15th July 2017,” the government statement said.

The ECC meeting was chaired by finance minister Ishaq Dar. “The decision has been made to boost the confidence of domestic cotton growers during the upcoming sowing season.”

A decline in cotton production last season forced the government to withdraw import duty and sales tax. The finance ministry had estimated revenue loss of around Rs10 billion following withdrawal of duty and sale tax.

Pakistan's cotton consumption is pegged around 15 million bales, while it had produced around 10.5 million bales. The country was the third largest raw cotton exporter, but it has been an importer for the last two years. Last year, Pakistan imported around 2.7m bales from India.

Meanwhile, the ECC has also decided to increase the quantity of urea approved for exports from the existing 300,000 tons to 600,000 tons. “The ECC also extended the deadline for export of urea from April 28, 2017 to October 31, 2017,” the statement said.

“These decisions were made by the ECC after considering the proposal of the Ministry of Commerce, based on the recommendations of the Fertilizer Review Committee.” The statement said the ECC was informed that sufficient production and inventory of urea of domestic consumption is anticipated during the Kharif 2017 for allowing export.

The government, in January, extended cash subsidy on domestic sales of fertiliser and also allowed 300,000 tones of its exports in a bid to reduce surplus inventory in the country. However, ECC then allowed traders to finalise their export deals by 28th of April without any subsidy.

Export permission was given in view of around one million metric tons of surplus urea fertiliser available in the country.  The ECC also approved the Ramzan Relief Package 2017 with subsidies worth Rs 1.602 billion on 19 commodities to provide relief to the general public during the upcoming holy month. These commodities include wheat flour, sugar, ghee, oil, pulses, white grams, baisen, dates, rice, squashes, black tea, milk, and spices.

“The commodities will be sold at subsidized rates across Pakistan through outlets of Utility Stores Corporation (USC),” the statement said. “In addition to the relief provided by the Ramzan Package, USC will also reduce prices on over 2,400 other items under different brands from 5 percent to 10 percent by obtaining special discount from vendors/suppliers and reducing its own profit margins.”