Govt to remove additional custom duties on 152 tariff lines

Islamabad: The Tariff Policy Board (TPB) on Thursday approved working on removal of additional custom duties on 152 tariff lines to provide cheap raw materials to the industrial sector and reduce cost of doing business.

TPB, during the 16th meeting presided over by Adviser to the Prime Minister on Commerce Razak Dawood, emphasised the need to remove anomalies in the tariff structure to reduce ease of doing business.

“The removal of anomalies will also help in improving competitiveness of Pakistani exports vis-à-vis its trading partners,” a statement quoted the board as saying.

The government abolished import duties on 1,623 tariff lines, pertaining to basic raw materials and intermediate goods through the Finance Act, 2020. Besides, additional customs and regulatory duties on 164 items related to textile sector, not manufactured in Pakistan, were also removed.

The meeting also discussed different proposals to remove additional customs duties on remaining raw materials, not manufactured in the country.

The government is gradually phasing out duties on industrial raw materials to revive laggard manufacturing sector. It planned to abolish additional customs and regulatory duties on 30,000 items of raw materials this fiscal year. The tariff rationalisation will have negative revenue impact of Rs14 billion in 2020/21.

The government realised the importance of shifting revenue reliance from imports to other taxes, such as sales tax and income tax. Currently, 45 percent of taxes are collected at import stage, while in India it stands at 21 percent, Bangladesh (28 percent) and developed world (10 percent).

Dawood said sectoral studies ought to be completed within the given time line so that tariffs rationalisations could be done in the sectors by taking into account the recommendations of the studies.

At the end of the meeting, the adviser said in pursuance of the objectives of National Tariff Policy 2019-24, meetings of the TPB are being held on regular basis.

“Prior to this policy, proposals regarding tariff rationalisations were mostly discussed at the time of budget exercise,” he said. “The tariffs are being used as instrument of trade policy so that manufacturing sector in Pakistan could be strengthened.”

Large scale manufacturing sector continued to post contraction for the past two years with the government’s urge to reduce current account deficit through import restriction adversely hurting the industrial sector dependent on imports of raw materials.

While current account position has turned into surplus, exports continued to show weakness despite depreciation of rupee against the US dollar to encourage exports and improve competitiveness of Pakistan’s industries.