Exporters irked by provincial taxes on raw material imports

Exporters have sought federal government's help to do away with infrastructure development cess imposed by the Punjab and Sindh governments on temporary imports of raw materials. The issue was raised by President Sialkot Chamber of Commerce and Industry Majid Raza Bhutta with Minister for Commerce, Engineer Khurram Dastgir Khan.
Sialkot is earning foreign exchange of $2.0 billion per annum. The industry despite many challenges is striving to increase exports. Surgical, sports gears and leather goods are the main exports of Sialkot.
Most of the industry imports raw materials from abroad to reprocess it and re-export it after essential value addition. However, the application of infrastructure development cess by the Provincial Governments of Punjab and Sindh has added to the costs of exporters who have to temporarily halt their imports of required raw materials. The Sindh Government has imposed infrastructure development cess @ 1.05% whereas most unexpectedly, Punjab has also imposed infrastructure development cess @ 0.90% which has further added to the woes of export sector.
"Application of such levies on imports is increasing the cost of production for exporters, making it difficult for them to compete in the international markets," said Butta. According to SCCI, under SROs such as SRO492, SRO 450, SRO 327 temporary imports are exempted from Sales Tax, Customs Duty and advance taxes. Furthermore, SRO 1125 exempts five export sectors permanently from Sales Tax and Customs Duties. The clarification mentioned above leaves no further space for application of any such levies or taxes on importable goods.
"We request the authorities concerned that the levy of infrastructure development cess on import of raw materials should be done away with on grounds that these raw materials ultimately become part of the finished goods meant for exports. As the export sector is zero-rated for sales tax purposes the levy of Sindh Infrastructure Developm-ent Cess ultimately enhances the cost of manufactured goods which is against the spirit of zero-rated policy of the federal government," said SCCI.
Prime Minister Nawaz Sharif recently announced a Rs 180 billion package for the export-oriented industry of the country. Interestingly, Prime Minister's team which organised the function did not invite Chief Executive of Trade Development Authority of Pakistan (TDAP), S. M. Munir.