Home » News » Finance » Budget 2005-06: Duty on 1,870 items reduced, 16 enhanced

Budget 2005-06: Duty on 1,870 items reduced, 16 enhanced

ISLAMABAD (June 07 2005): The government has reduced customs duty on the import of 1,870 items and duty on 16 items has been enhanced to protect the local industry.

It has been proposed to introduce a new slab of 15 percent in addition to existing four bands of 5 percent, 10 percent, 20 percent and 25 percent in order to provide suitable cushion in the tariff for growth of industry/trade. The application of cascading formula in tariff rationalisation has, thus, become more convenient and convincing. It has been proposed that 190 items (tariff lines) would be kept at 15 percent.

According to Pakistan Customs Tariff (2005-06), duty has been reduced on MEG (polyester) from 20 percent to zero-percent; fibre 10-25 percent to 3 percent; polyester chip, 15 percent to 6.5 percent; polyester yarn, 20 percent to 7 percent; fabrics, 25 percent to 14 percent (one percent withholding tax would be levied and total incidence of taxes will be 15 percent); urea fertilizer, 5 percent to zero-percent and duty on agricultural tractors has been brought down from 20 percent to 15 percent.

In all duty on 16 items has been enhanced on the recommendations of various ministries and Engineering Development Board (EDB) for the protection of local industry. However, duty has not been raised to generate revenue from these items.

Duty on horse hair, okra seed, viscose yarn has been raised from 5 percent to 7 percent; break lining and pads, from 25 percent to 35 percent; electric blanket, 5 percent to 15 percent (to check misdeclaration) and duty on metal jacks (gas kits) has been brought down to 10 percent to 15 percent.

Details revealed that timely availability and use of fertilizers play a vital role in optimum output of the agriculture sector. Presently, fertilizers, except urea, are exempted from the customs duty. It has been proposed to continue the existing exemption. The Ministry of Food, Agriculture and Livestock (Minfal) has suggested to exempt duty on import of urea. It has been proposed to exempt duty on import of this fertilizer from its present rate of 5 percent duty.

Agricultural tractors, falling under PCT heading 87.01 in CBU condition, are importable at 20 percent customs duty. The local production is not sufficient to meet the growing demand of the farmers who have to wait for long time to get deliveries. This needs remedial measures. It has been proposed that the customs duty on import of agricultural tractors in CBU condition may be reduced from 20 percent to 15 percent ad val.

To improve the efficiency as well as the quality output of this important sector, it has been proposed that duty on presses (HS heading 8445.1900 and 8479.8990) for ginning industry may be withdrawn. The existing rate of duty on these presses is 5 percent and 10 percent.

Last year, most of the machinery used in agriculture sector was exempted from the duty. The Minfal has suggested zero-percent duty on 25 types of remaining machinery and equipment, which are mostly used in agriculture and dairy industry.

Agriculture being backbone of the economy and major feeder of the export sector deserves priority attention. Accordingly, it has been proposed to reduce duty on agriculture inputs. At the same time, maximum protective rates to dairy, fish and poultry segments have been kept undisturbed. Hence, the local manufacturing industry has been given the required support both on account of protection to it and relief on its inputs. The proposed reduction in duty may be approved.

Poultry is an important segment of the economy. A common consumer has substantial dependence on it. Last year, duty on vitamins used in the poultry feed was reduced through SRO to 10 percent. In order to boost this industry, it has been proposed to further reduce customs duty on vitamins to 5 percent.

Sharp increase in the domestic demands of meat, beef and other edibles put the domestic prices of these essential items under pressure. In order to offset the negative impact on common man and to conserve the domestic base of livestock, the government has decided to exempt these items from customs duty and sales tax. It has been proposed to continue the existing exemption. Additionally, on the recommendations of Minfal, reduction in duty on other 319 edible items has been proposed.

Primary raw materials like lace, natural gums, resins, gum resins, and oleoresins are those inputs, which are mostly used in industries like textiles and pharmaceuticals. It has been proposed to rationalise duty is on these items to support related sectors.

For any substantial industrial development of the chemicals and allied industry, their inputs play a vital role to make it viable and competitive. A complete review has been done to provide relief to this sector. It has been proposed to reduce the rate of duty on 416 items at a wider scale. The reduction on about 416 items goes down from 25 percent to 20 percent, 20 percent to 15 percent and 10 percent to 5 percent.

Dyes and chemicals are important industrial raw materials with multiple uses. In all 96 raw materials relating to dyes and chemicals have been identified. It has been proposed that duty on these items be reduced to 5 percent, 10 percent, 15 percent and 20 percent to give a boost to the industry.

Plastic sector is primarily dependent upon the behaviour of the petroleum sector. The skyrocketing POL prices for the last two years have badly affected the prices of the petroleum-based raw materials, which are the most crucial requirements of the industry. Thus, this sector is facing difficulties and needs government support. Presently, the rate of duty ranges from10 percent to 25 percent. Therefore, reduction in duty on 56 items has been proposed. This reduction in duty will provide major boost to the economy and to exports of plastics.

Presently, wood is chargeable to customs duty at 5 percent, 10 percent, 20 percent and 25 percent. There is a gap in demand and supply of this product. Pakistan, which was already deficient in forestation, needs to conserve whatever, is available. In order to ease out pressure on the depleting forests, it has been proposed to exempt customs duty on wood (HS heading 44.03 & 44.07) and customs duty on wood products be reduced from 25 percent to 20 percent and 10 percent to 5 percent.

It has been proposed that duty on medicines like vaccines for Hepatitis B, etc., be reduced from 20 percent to 10 percent and 10 percent to 5 percent.

In order to facilitate the industrial activities of the confectionery and related industry, the Minfal has recommended reduction in the rate of duty on its inputs. It has been proposed that the duty on the import stage on these items may be reduced.

Cosmetics industry is another growing industry of the country, which has the forward looking potential. It has been proposed to rationalise duty on its inputs. This will help it in growing further. The reduction of duty ranges from 20 percent to 15 percent and 10 percent.

There have been repeated demands from the manufacturers of soap and detergent industry to rationalise duty on its inputs for better health of the industry. This industry was already facing difficulties due to smuggling. In order to make this industry competitive and viable to grow, it has been proposed to reduce customs duty on its inputs ranging from 25 percent to 20 percent, 20 percent to 15 percent and 10 percent and 10 percent to 5 percent.

Technology is changing at a fast speed and the industry has to keep pace with the new developments; otherwise, it will not be able to survive. In order to support this industry, it has been proposed to rationalise duty on its inputs, which can help it in surviving. This reduction is from 10 percent to 5 percent (Annex- XV).

Washing machine industry has made good progress on account of both quality and quantity. It has attained a stage where it is looking for export market. In order to make it internationally recognisable product, it is imperative that the required raw materials, components and sub-components may be allowed at a concessionary rate of duty. Presently, these are importable at 25 percent. It has been proposed that raw materials may be allowed at 5 percent, components and sub-components may be allowed at 10 percent.

Pakistan's television industry is growing at an encouraging level. It needs to be incentivised to enable it to face competition, which has been posed by cheaper imports from Chinese and other suppliers. It has been proposed that import of picture tubes for assembly of TV sets imported by the manufacturers may be zero-rated as opposed to 5 percent customs duty to enable the industry to sustain the pressure.

Circuit breakers have multiple uses, which primarily provide safety valves to the electronic/electrical equipment. There are 35 sub-components and components used in the assembly of the circuit breakers which are importable at the duty ranging from 10 percent to 20 percent. It has been proposed that all these sub-components and components may be allowed at a concessionary rate of 5 percent duty.

The country has recently started manufacturing of energy saving lamps. In order to provide a competitive edge to the local manufacturers, customs duty on parts and components of energy saving lamps has been reduced to 5 percent.

With the introduction of new technologies, new products are coming in. The government has priority policy to support construction sector of the country. In order to encourage construction activities, it has been proposed that import of four raw materials and two components used for manufacturing of composite doors and windows may be allowed at a concessionary rate of 5 percent and 15 percent, respectively as against the existing rate of 10 percent to 25 percent.

Presently, new computer monitors (8471.6079) in CBU condition are importable at 5 percent duty. In order to encourage local assembly of computer monitors it has been proposed that CKD kits for assembly of computer monitors imported by the manufacturers/assemblers may be exempted from the customs duty.

Compressors and evaporators used in air-conditioners, refrigerators and deep freezers are importable at 5 percent customs duty. The industry is facing stiff competition from cheaper imports coming from various sources, including China, Korea, etc. In order to make the industry viable and competitive, it has been proposed that import of compressors (HS heading 8414.3010) and evaporators (HS heading 8418.9910) may be zero-rated.

It has been proposed to continue the existing concession to CNG sector to encourage its development.

The local production of tyres for light trucks is just 21 percent of the total domestic requirement and the rest is being imported to cater to the market needs. Tyres used on construction and industrial handling vehicles/machines are not being produced locally. In order to lower cost for consumers, it has been proposed that the customs duty on tyres for light trucks (HS heading 4011.2010) may be reduced from 25 percent to 20 percent and for constructions/industrial vehicles (HS headings 4011.6200, 6300, 6900, 9300, 9400 & 9900) from 25 percent to 10 percent.

Presently, import of bicycles is chargeable to duty at 30 percent and its parts are importable at 35 percent. In order to protect the local industry of bicycle the rate on finished bicycle is being maintained at 30 percent, but it has been proposed to reduce duty on its parts to 25 percent so that the prices of locally manufactured bicycles can be reduced.

The import of carriages for disabled people whether or not motorised or otherwise mechanically propelled (HS heading 87.13) is chargeable to duty at 10 percent. These disabled are special people of the society deserving due care and attention. It has been proposed that duty on carriages for disabled people may be reduced from 10 percent to 5 percent.

Baby carriages are chargeable to 30 percent duty. It has been proposed to reduce the rate of duty on baby carriages (HS heading 8715.0000) from 30 percent to 20 percent.

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