SHC quashes regulatory duty on non-essential imports

KARACHI: Sindh High Court on Wednesday restrained the Federal Board of Revenue (FBR) from collecting regulatory duty imposed three months ago on non-essential imports.

The court declared the notification (1035(I)/2017) issued by FBR ‘illegal’ in an order passed in a ‘reserved judgment’ by a division bench comprising justice Muneeb Akhtar and Omar Sial.

In October last year, the FBR imposed regulatory duty on around 731 items through a statutory regulatory order, which was quashed by the court.

The court ordered the FBR authorities to pay the refunds collected after the notification.

“Such refund may be made by way of direct repayment or adjustment (against any tax or duty) and in one lump-sum or in installment, as the FBR may determined,” the court order read.

The court further ordered that the refund amount should be repaid before October 31.

Soon after the imposition of the regulatory duty in October 2017 a number of taxpayers filed petitions before the higher court. The court, in its interim order the same month, granted petitioners with a right to pay half of the regulatory duty to the FBR and remaining to the Nazir of the court.

The court, however, allowed the government to file appeal against the judgment within a month. The order will remain suspended till the superior court takes any action in favour or against the judgment.

The court further said during the suspension of the order the collection of regulatory duty will be paid as per the interim order.

Tax experts said changes in the tax rates should be made through an act of parliament.

A supreme court’s lawyer said the notification of imposing regulatory duty by the finance ministry shows a sheer mismanagement.

“The government introduced the regulatory duty after four months of presenting budget 2017/18 on excuses of curtailing imports,” the lawyer added.

The tax practitioner said the finance minister was in haste while introducing the duty and including bulk of items, used by export oriented units, into the list for regulatory duty.

Tax experts said the National Tariff Commission is a regulatory body which should be used to discourage the unnecessary items through imposing anti-dumping duty.

The experts said the proper delegation of powers should only be exercised for changing procedure and policies.

Analysts, however, said the government is expected to save around two billion dollars a year because of the regulatory duties.

The central bank said the government increased regulatory duties on non-essential items with a dual objective to protect local industry and correct the external sector imbalance.

“It is expected that the initiative may somewhat discourage imports of non-essential items and may generate additional revenues,” the State Bank of Pakistan (SBP) said in a report.

“…increase in regulatory duties on import of a range of non-essential items in the Finance Act 2017-18 also contributed to higher custom duty collection.”