Duty/taxes exemption for engineering sector: FBR rejects EDB proposals

The Federal Board of Revenue (FBR) has outrightly rejected a proposal of Engineering Development Board (EDB) to provide total exemption of duties and taxes on all kinds of imports made by the local engineering sector. Sources told Business Recorder here on Saturday that the EDB has received the comments of the FBR on the National Engineering Exports Development Strategy (Needs) developed by the EDB.
The EDB had requested the FBR to remove distortions in various policies of the government and to develop the engineering sector. The FBR should create even playing field for the local engineering industry versus imports. Distortions need to be removed where local industry is subjected to payment of duty/taxes, while imports of finished goods are exempted under customs and sales tax exemption notification SRO 575 (I)/2006.
Responding to the EDB proposal, the FBR said that the local industry has been given considerable concessionary treatment in customs duty on import of raw materials, sub-components, components and assemblies. According to FBR, tariff regime allows an industrial undertaking to import plant and machinery at reduced rate of 5 percent duty, provided the same are not manufactured locally. The FBR notifies the list of locally manufactured items on the recommendations of EDB. Notified list is neither exhaustive nor dispute-free.
The complete plants consist of numerous machines, components, accessories, etc, which are not imported in one go mostly. Partial shipments remain vulnerable to administrative hiccups to determine the local manufacturing status of each item. These types of issues create disputes and discourage the investment. Therefore, the condition of extending concession to sectors on imports even if manufactured locally is restricted only to a few priority sectors.
Furthermore, in the 2008-09 budget, it was decided that plant, machinery, equipment and capital goods which are worth $50 million (C&F) or above and being imported for setting up of new industrial project may be de-linked from the local manufacturing condition. Accordingly, SRO 575(I)/2006 was amended to incorporate the same to facilitate the project imports. As this measure is aimed at encouraging industrial investment on a substantial scale, the existing arrangement may continue. Therefore, FBR does not agree to the proposal. Furthermore, local industry has been given considerable concessionary treatment in customs duty on import of raw materials, sub-components, components and assemblies, FBR comments received in the EDB added.