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  • Jan 5th, 2018
  • Comments Off on Increase, imposition of RD: FBR’s proposal blocked
Secretary Commerce Younus Dagha has reportedly blocked Federal Board of Revenue's (FBR) proposal on increase and imposition of regulatory duty (RD), saying that Commerce Ministry was not taken on board on this plan prior to bring it before the ECC, well-informed sources told Business Recorder.

The Revenue Division informed the Economic Co-ordination Committee (ECC) on December 22, 2017 that in order to improve balance of payment position by reversing the trend of widening trade deficit, the ECC in its meeting held on October 6, 2017 had approved the proposal for increase/ levy of RD ranging from 10% to 30% on a number of non-essential/ luxury/ locally produced items.

Consequently, the FBR issued SRO 1035(1)/2017 of October 16, 2017 in terms of section 18(3) of the Customs Act, 1969, resulting in the levy of RD on 27 new items (137 tariff lines) and increase of RD on 31 existing items (219 tariff lines).

A large number of representations were received against the above levy/increase of the RD from different stakeholders. Simultaneously local manufacturers of various items also approached the FBR with proposals for levy/ increase of RD on certain locally produced goods to encourage import substitution.

Some trade associations also approached Standing Committees on Finance of both the National Assembly and the Senate. The latter, after conducting several hearings, recommended forming a committee and considering all the representations regarding RD filed by different stakeholders during the meeting held on 16th November, 2017.

According to Revenue Division, an inter-ministerial committee comprising representatives from FBR and Ministries of Commerce and Finance was constituted which held several meetings on the issue and also consulted the Textile Division, Engineering Development Board and National Tariff Commission.

A total of 53 representations were received from different stakeholders. In 41 representations, the importers and local manufacturers sought removal/reduction or partial exemption from RD claiming, inter alia, the same are input goods for their industry. In 12 representations, the local manufacturers sought protection against cheap imported goods through the imposition/enhancement of the RD. Certain anomalies in the existing duty structure were also identified in some representations with a request for rationalization. The committee has examined all the representations regarding removal, rationalization and imposition of RD and made recommendations.

The Revenue Division proposed that in view of the recommendations made by the committee and to rectify tariff anomalies, (i) RD on 8 items (59 tariff lines) may be withdrawn as per conditions mentioned there against, (ii) RD on 6 items (22 tariff lines) may be reduced as per conditions mentioned there against, (iii) RD on 05 items (43 tariff lines) may be increased and (iv) RD on 2 items (58 tariff lines) may be levied, at the rates mentioned against each. The impact of these measures during the remaining 06 months (January to June) was expected to be revenue neutral. In terms of section 18(3) of the Customs Act 1969, the Board with approval of federal minister-in-charge is empowered to levy RD. However, this power has been challenged by various petitioners in Sindh High Courts and Lahore.

Accordingly, as a matter of abundant caution the ECC of the Cabinet was requested to grant approval in principle to the proposal. During ensuing discussion, the secretary Commerce Division stated that they supported the proposals regarding withdrawal of RD and reduction of RD on the items respectively. However, they were not in favor of proposed enhancement and imposition of RD on items mentioned, as no consultation had been made with Commerce Division in this regard.

After detailed discussion, the ECC deferred consideration on increase in RD and imposition of RD, with the direction to the Revenue Division/FBR to consult Commerce Division prior to submission of its proposals to the ECC.

Copyright Business Recorder, 2018


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