5th Schedule of Customs Act 1969: FPCCI urges FBR to introduce amendments

ISLAMABAD: Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has recommended the Federal Board of Revenue (FBR) to introduce major amendments in the Fifth Schedule of the Customs Act 1969 to promote import substitution by allowing exempt imports of raw materials/ components for the manufacturing of exempt and concessionary imported goods to promote the local manufacturing of engineering/ capital goods.

According to the budget proposals of the FPCCI received at the FBR, the FPCCI has submitted budget proposals in respect of promoting import substitution by way of allowing exempt imports of raw materials, subcomponents and components under the Fifth Schedule of the Customs Act for the manufacturing of following exempt and concessionary imported goods by way of providing a level playing field to promote the local manufacturing of engineering/ capital goods: (i) Plant, machinery, equipment and apparatus including capital goods for various industries sectors mentioned in Part-I of the Fifth Schedule with explanations thereof to include manufacturing of spares, accessories etc.

(ii) Supplies against International Tenders either for local or abroad; (iii) supplies to projects or sectors entitled to import or purchase such goods free of duties and taxes; like Export processing zones, CPEC, Gwadar free zone, SEZs; (iv) Goods imported under concessionary SROs and (v) any other goods as recommended by EDB.

The FPCCI explained that the local manufacturing of engineering/ capital goods local manufacturing of capital goods means plant, machinery, equipment, spares, accessories and apparatus for various industries and sectors as are mentioned in Part-I of the Fifth Schedule of Customs Act, 1969.

According to the Engr MA Jabbar Vice President FPCCI, the government has initiated several projects through local as well as foreign funding in different sectors like energy and infrastructure to strengthen the economy.

Most of these projects are allowed to import required machinery and equipment, including input materials, duty and taxes free. On the other hand, local engineering/ capital goods industry pays duties and taxes on imports of their raw materials, sub-components and components; putting the local industry in a severe disadvantaged position.

Several types of machinery, equipment and components for the above-mentioned projects are allowed concessionary imports, which can be manufactured and procured locally.

He said that more than Rs200 billion exemptions have been provided in addition to another sizeable tax expenditure as concession for the import-based projects. Nothing has been considered for providing the parity to import of raw materials, sub-components and components for the local manufacturing capacity to become supply chain and provide the spares and other intermediary goods for exempted import projects.

He said that these exempted projects in Fifth schedule of the Customs Act include almost all the capital goods and machinery under chapter 84 and 85 and in other chapters. He said that alone chapter 84 and 85 imports are more than 10 billion USD and so are other few chapters capturing the import figures of 10 billion USD in addition to.

He said that by providing parity for the import inputs for local value addition, we can gradually improve the present very low manufacturing percentage for which the present situations and decision-makers appear to be on the same consideration to reduce the imports and improve the industrialization by way of providing parity incentive for local manufacturing.

He said that it is also necessary to mention that the global trade is dominated by engineering goods of more-than 50 per cent in the global trade merchandise, while we are only just chasing the global trade of 6 percent in textile and clothing, wherein also we have not excelled beyond share of two per cent of the total textile trade, even in spite of major of 2.27 billion dollars invested in textile under TERF scheme at three percent with further included spread by banks and providing other subsidies on electricity, gas, ERF and duty drawback of taxes and major share in long term lending.

He further said that he has discussed this issue in the recent meeting with the chairman FBR and the finance minister, who have agreed in principle that our proposal in this regard merits the consideration and it was also expressly agreed by the finance minister in principle to provide a level playing field for made in Pakistan strategy.

Copyright Business Recorder, 2022