Import stage: Government likely to reduce RDs, ACDs on several items

In a major policy shift, the government is likely to reduce Regulatory Duties (RDs) and Additional Customs Duties (ACDs) on several items at the import stage through amendments to the tax laws in February 2020. Sources told Business Recorder here on Saturday that the Federal Board of Revenue (FBR) is considering a reduction in RDs and ACDs on different items. Any kind of additional taxation on imports would not serve the purpose.

In case the sales tax rate is proposed to be increased on petroleum products, their consumption would further come down. Their local consumption is already down by almost 20 percent. The FED rate increase on tobacco will also be counter-productive because its volume showed a decreasing trend during the current fiscal year. One of the possibilities is to open up imports as it could lead to increased revenue collection and second viable option is to make effective enforcement of laws. The CNIC condition has become applicable on purchases of over Rs 50,000 with effect from February 1, 2020. An estimated loss of Rs 56 billion of taxes is incurred on every one billion dollars of import compression.

There are hundreds of items on which the RDs and ACDs were imposed at different rates during the past. The import compression is around $5-6 billion, resulting in substantial losses so the government is now considering easing out imports through rationalizing import tariff in the shape of reducing RDs and Additional Customs Duty in a phase-wise manner. This step is aimed at opening up imports so that the revenue collection could go up at the import stage.

Sources said the reduction/abolishing of RDs and ACDs is also under consideration and may be presented in the current month.

Federal Board of Revenue (FBR) has increased/imposed regulatory duties on the import of 569 items from July 1, 2019 and imposed 2 percent additional customs duty on tariff slabs of 0 percent, 3 percent and 11 percent; 4 percent additional duty on tariff slabs, and 16 percent and 7 percent additional duty on items covered under tariff slabs of 20 percent and higher slabs.

Under SRO 680(I)/2019, FBR has increased or imposed regulatory duties on the import of 569 items including different types of vehicles. This notification took effect from 1st July, 2019 and if not rescinded earlier, will remain in force till June 30, 2020.

RDs have been imposed or increased within the range of 5 percent, 10 percent, 15 percent, 20 percent, 25 percent, 30 percent, 35 percent, 40 percent, 50 percent, 70 percent and 90 percent.

FBR has imposed a 50 percent RD on the import of cheese and curd, natural honey (30 percent); imitation jewelry (45percent); coconuts, Brazil nuts and cashew nuts, fresh or dried, whether or not shelled or peeled (20 percent); fruit juices (60 percent); instant coffee in bulk (15 percent); soups and broths and preparations therefore; homogenized composite food preparations (20 percent); ice cream (20 percent); paints and varnishes (5 percent); perfumes and toilet waters (50 percent); articles of apparel and clothing accessories (10 percent); wallpaper and similar wall coverings; window transparencies of paper(30 percent); tableware, kitchen ware, other household articles and toilet articles, of Porcelain or China, Ceramic tableware, kitchen-ware, other household articles and toilet articles, other than of porcelain or china (20 percent); energy saving lamps (2 percent); new Mini Vans (CBU) 15 percent; new 4x4 vehicles (CBU) 15 percent; new Sport utility vehicles (15percent); old and used cars and Jeeps 1801 cc to 3000cc and old and used cars and jeeps above 3000 cc (70percent); new Sport utility vehicles (SUVs 4x4) (90 percent); vehicles of a cylinder capacity exceeding 1000cc but not exceeding 1300cc (15 percent); bicycles and other cycles (including delivery tricycles), (10 percent); wrist watches, pocket watches and other watches, including stop watches, with case of precious metal or of metal clad with precious metal (30percent).

"The rate of regulatory duty on import of CKD/SKD kits, of home appliances, mentioned and of which kits are not specified separately therein, shall be 5 percent," according to FBR.

For the purpose of levy of regulatory duty under this notification, the value of vehicles (PCT Code 87.03) having bullet proofing and other security features shall be the same as determined under notification No SRO 1121(1)12007, dated the 17th November, 2007.

Under SRO 670(1)/2019, the value of goods for purpose of levying additional customs duty shall be the value as determined under section 25 or section 25A of the Customs Act 1969.

The additional customs duty shall not be levied on import of seeds and spores for sowing; import under Chapter 31 of First Schedule of the Customs Act, 1969; import of goods classifiable under specific PCT codes; plant and machinery used in manufacturing or production of goods as is classifiable under Chapter 84 and 85 of the First Schedule to the Customs Act, 1969; import under Chapter 99 of First Schedule of the Customs Act, 1969; import under Fifth Schedule to the Customs Act, 1969 except exclusions; import under the Baggage Rules, 2006; import under sub-chapters 3 and 7 of chapter XII and chapter XV of Customs Rules, 2001; import under Notification No. SRO 577(1)/2005 dated 6th June, 2005; import under Notification No. SRO 565(1)/2006 dated 5th June, 2006; import under Notification No. SRO 693(1)12006 dated 1st July, 2006; import under Small and Medium Enterprises and Export Oriented Units Rules, 2008; import under temporary importation scheme vide SRO 492 dated the 13th June, 2009 and imports under condition of SRO 678 by the exploration and production companies, their contractors and service companies for offshore projects only.