The Economic Coordination Committee (ECC) of the Cabinet Tuesday approved withdrawal of customs duty, additional customs duty and sales tax on import of cotton and discussed submission of sponsor request from the Chinese side for 300 MW Coal Power Plant at Gwadar. A meeting of the ECC presided over by Finance Minister Asad Umar on a proposal of Power Division, sources said, held a discussion on submission of sponsor request from the Chinese side for 300 MW Coal Power Plant at Gwadar. However, there was no clarity about the decision as the finance minister in the middle of the meeting had to rush to the Supreme Court over the Nai Gaj Dam construction matter.
On a proposal of Textile Division, the ECC approved withdrawal of 3% customs duty, 2% additional customs duty and 5% sales tax on import of cotton to bridge the demand and supply gap and help the textile industry, especially the export segment.
The proposal stated that import of cotton had remained duty-free till the slab of 0% was abolished in 2014-15 and customs duty (CD) of 1% was imposed along with the 5% sales tax. Later on 1% slab was made 2% and then 3% along with the 2% additional duty to make it 5%. Currently, cotton is subject to 3% customs duty, 2% additional customs duty and 5% sales tax.
The Prime Minister's Package of incentives for exporters was announced on January 10, 2017, wherein textile sector was provided a number of facilitations including withdrawal of customs duty and sales tax on imported cotton effective from January 16, 2017. However, customs duty and sales tax on imported cotton were re-imposed from July 15, 2017 on a proposal of Finance Division in view of arrival of the domestic cotton. The customs duty and sales tax were withdrawn again with effect from January 8, 2018 but were re-imposed from July 15, 2018 on the request of Ministry of National Food Security and Research (MNFSR) on May 31, 2018.
The ECC was told that the annual consumption of cotton by the textile industry of Pakistan was stated to be around 12 to 15 million bales and entire sustainability and viability of spinning industry is dependent on performance of the domestic crop and shortage is met through import of cotton from other countries. Finance Division contended in the proposal that the impact of duties is induced in the price of domestic cotton, resulting in increase in cost of doing business for the entire textile value chain, specially for export-oriented sector in highly competitive international markets.
Cotton crop for 2018-19 is expected to be around 10.78 million bales of 170 kilograms each, showing a decrease of -9.7% if compared to last year and a decrease of 24% against the initially fixed target of 14.37 million bales. Further, 9.62 million bales have already arrived in the ginning factories as of December 15, 2018 and bulk of the cotton will be lifted in January 2019.
The ECC was requested that customs duty and additional customs duty on import of cotton may be withdrawn. The impact of duties is induced in the price of demesne cotton, resulting in increase in cost of doing business for the entire textile value chain especially for export-oriented sector in highly competitive international market.
The ECC also approved a proposal of Commerce Division that duty and taxes on all imported vehicles in new/used condition under personal baggage or gift scheme will be paid out of foreign exchange arranged by Pakistan nationals themselves or local recipient supported by bank encashment certificate showing conversion of foreign remittance to local currency. The meeting also approved regulatory amendments in the Export Policy Order 2016 and Import Policy Order 2016 as proposed by Commerce Division aimed at increasing ease of doing business.
The ECC discussed and approved another proposal from Ministry of Commerce and Textile to clear outstanding claims of Drawback of Local Taxes and Levies (DLTL) under the exports incentive scheme announced by the government in the Finance Act 2014-15. The ECC decided that cases which were submitted in time but have been pending due to want of funds, will be entertained by the government.