In response to the concerns received from the industry, the review committee comprising representatives from FBR, Commerce Division and Finance Division, held four meetings to remove or retain the RDs on the basis of criteria mentioned above. The Federal Board of Revenue was directed by the Senate Standing Committee on Finance, Revenue, Economic affairs and Narcotics Control to hold meetings and submit compliance report. Therefore, status of compliance in this regard may be sought from the FBR.
A brief of the FBR and Commerce Ministry submitted to the Senate Standing Committee on Finance revealed that the FBR has submitted a progress report on revisiting the notification of regulatory duty dated 16-10-2017 after consultation with all stakeholders, as recommended by the committee.
In view of the increasing pressure on balance of payments, the Monetary and Fiscal Policies Coordination Board of State Bank of Pakistan in its meeting held on 25th July, 2017 established an inter-ministerial committee on tariff rationalization comprising members from Finance Division, Commerce Division, SBP and PIDE to evaluate tariff structure that may curtail the widening trade deficit. As decided in the meeting, Commerce Division undertook a tariff rationalization exercise and suggested the following:
Firstly, the customs duty may be reduced at raw materials and intermediate goods that are imported under various FBR schemes including Rebate, Duty and Tax Remission Scheme (DTRE), Export Orient Units (EOU) and Manufacturing Bond (MB) - except the locally manufactured and consumer items. In addition to making the inputs cheaper, the proposed reforms would also address delays in payment of drawbacks and tax rebates in order to improve liquidity of the exporters. Furthermore, this would also remove bias against small and medium enterprises (SMEs) which are unable to avail concessions available under statutory regulatory orders (SROs).
Secondly, to compensate for the revenue loss, tariffs on non-essential and consumer goods be increased to discourage widening imports. During discussions it was decided that tariff reduction on raw material and intermediate goods would be implemented after further consultations at a later stage of tariff rationalization exercise.
To curtail imports of non-essential and luxury items, a joint exercise was carried out with the Federal Board of Revenue (FBR) and Finance Division. The Commerce Division proposed an initial list of items based on the following criteria:
RD may be applied on non-essential items and luxury goods of which import during the past three years has increased. The RD on raw material and intermediate products should not be increased. The RD may be applied on cascading basis to incentivise value addition. The RD may be applied to reduce tariff dispersion since high variation in tariff of similar items leads to the issues of misclassification.
The Economic Coordination Committee (ECC) of the Cabinet on 6th October, 2017 approved the summary of Commerce Division, dated 5th October, 2017, on "Import Rationalization" and, inter-alia, approved tariff rationalization on import of non-essential and luxury goods. Accordingly, the FBR imposed regulatory duties through SRO No 1035(1)/2017 on October 16, 2017. However, some tariff lines representing industrial inputs were also subjected to RDs.
Subsequently, a number of stakeholders submitted their representations to the Commerce Division and FBR requesting withdrawal of RDs imposed through SRO 1035(1)/2017. In response to the concerns received from the industry, the Review Committee comprising representatives from FBR, Commerce Division and Finance Division, held four meetings to remove or retain the RDs on the basis of criteria mentioned above.
The Federal Board of Revenue was directed by the Senate Standing Committee on Finance, Revenue, Economic Affairs and Narcotics Control to hold meetings and submit compliance report. Therefore, status of compliance in this regard may be sought from the FBR.