close
Thursday March 28, 2024

Custom duty exemption proposed for foreign donations to govt

By Mehtab Haider
June 13, 2021

ISLAMABAD: The government proposed exemption of gifts or donation to provincial and federal authorities from abroad from customs duty in the budget 2021/22.

The government placed a different exemption into First Schedule of Customs Act 1969 in the finance bill 2021/22. The step was taken to streamline exemptions as it was available under different clauses but now it was clubbed into First Schedule of Customs Act.

“Goods received as gift or donation from a foreign government or organisation by the federal or provincial government or any public sector organization subject to recommendation of the federal government and concurrence by the federal board of revenue will have zero custom duty,” said the bill. Goods received as gift by Pakistani organisations from Church World Services or the Catholic Relief Services and articles, value of which does not exceed Rs30,000 per parcel, if imported through post or courier service as unsolicited gift parcel will have zero duty.

There will be zero duty on the goods imported into and exported (except to tariff area of Pakistan) from the Export Processing Zones established under the Export Processing Zone Authority Ordinance, 1980 (IV of 1980) and any enactment relating to Gwadar Special Economic Zone, subject to such conditions, limitations and restrictions as the Federal Board of Revenue may impose from time to time.

Capital goods, as defined in the preamble of Part-I of the Fifth Schedule to the Customs Act, and firefighting equipment, except the items listed under Chapter 87 of the Pakistan Customs Tariff, imported for setting up of a Special Economic Zone (SEZ) by zone developers and for installation in that zone by Zone Enterprises, on one-time basis as prescribed in the SEZ Act, 2012 and rules thereunder subject to such conditions, limitations and restrictions as the Federal Board of Revenue may impose from time to time. Codeveloper as defined in Special Economic Zone Rules, 2013, shall also be entitled to avail the same incentives and exemptions for the same period as available to the Developer under the SEZ Act 2012, subject to condition that the Developer of the SEZ relinquishes its rights to the incentives and exemptions in favour of the Codeveloper; provided further that the respective Special Economic Zone Authority duly endorses such reassignment, and ensures that such reassignment will not be misused.

Following imports for construction, development and operations of Gwadar port and Free Zone Area subject to such conditions, limitations and restrictions as the Federal Board of Revenue may impose from time to time equipment and materials (plant, machinery, equipment, appliances and accessories), imported by the concession holder, its operating companies including Gwadar international terminals limited and Gwadar marine services limited, and their contractors and sub-contractors exclusively for construction and operation of the terminals and the free zone area for a period of 40 years.

Ship bunker oils imported by the Concession holder for the sole purposes of supplying fuels and lubricants to all visiting ships including foreign and local and fishing vessels at Gwadar Port for a period of 40 years. Vehicles imported by the concession holder and its operating companies for a period of 23 years for construction, development and operations of Gwadar Port and Free Zone Area under the regulatory mechanism. The regulatory mechanism for such vehicles, including the number and types importable, shall be devised by the Ministry of Port & Shipping and FBR (in consultation with the Provincial Government if so required) and notified by the FBR.

CGT cut set to stoke stocks

Stocks swung wildly in the week to end barely changed because of budget caution; however a cut in a tax on securities is likely to stoke sentiments down the road, dealers said.

The KSE-100 shares index gained 0.19 percent or 93.02 points to close the week ended June 11, 2021 at 48,304.72 points.

Topline Securities in a note said stocks inched up 0.2 percent during the week as the investors weighed 20 percent sequential increase in trade deficit, record remittances by overseas Pakistanis and pro-business and pro-people budget announced by the Finance Minister Shaukat Tarin on weekend.

KSE-30 Shares Index declined 0.89 percent or 175.92 points to close at 19,478.73 points. An analyst at Pearl Securities said the benchmark index moved both ways during the week as Pakistan met 31 of 40 FATF recommendations, Rs89 billion disbursement to independent power producers (IPPs). “Moreover continuing IMF negotiations and KSA approving financing of SR901 million for financing of Mohmand hydropower dam also guided investor sentiment,” the Pearl Securities analyst said.

Ali Zaidi at JS Global Capital said the benchmark index closed the volatile week nearly flat.

Even though investor participation declined marginally this week, it was by no means unhealthy, zaidi said.

He added that traded volumes averaged at 1.08 billion shares a day, while average value of traded securities was recorded at $162 million/day.

Moreover, net selling by foreigners went up this week, particularly in index heavyweight sectors.

Most of the foreign selling was absorbed on the local side by mutual funds.

Over the week, the government finally cleared Rs89 billion to 20 IPPs.

Moreover, news flows related to the Federal Budget FY22 continued to pour in during the week that helped build positive expectations for an accommodative budget.

Moreover, the FATF Asia Pacific Group (APG) has cleared Pakistan on 22 more points. Other news flows during the week included cumulative inflows of $1.25 billion in Roshan Digital Accounts, record 34 percent increase in remittances in May 2021, and trade deficit widening by 30.6 percent to $27.488 billion in 11MFY21.

A report issued by KASB Securities noted after ages, Pakistan’s government had taken pro-stock market investor measures by reducing the Capital Gains Tax (CGT) to 12.5 percent from 15 percent, reducing turnover tax to 1.25 percent and removal of withholding tax (WHT) on margin financing.

“The market will react very positively on the CGT news,” CEO KASB Securities Arsalan Soomro said.

“Investors have been asking for lower tax rates since it’s a documented source of investment and the government’s yielding to the demand will be a win-win for investors and governments,” Soomro added.

He further said this fiscal year would be full of optimism and strong bull-run as long as oil prices do not go out of control.

An analyst at JS Global Capital said with abundant incentives for various sectors across the board and some relief over CGT on stocks, the local equity market was likely to celebrate the Federal Budget FY22 going forward.

“We highlight construction-oriented sectors, autos, export-oriented sectors, technology sector, food sector and other manufacturing sectors as key beneficiaries of the Budget FY22,” the analyst said.