The government is likely to revise customs tariff slabs on imported items in the upcoming budget (2019-20). Sources told Business Recorder here on Monday that the ongoing budget exercise is seriously considering to make changes in the existing import tariff slabs. Presently, customs tariff slabs are: 3 percent, 11 percent, 16 percent and 20 percent. The rates of 30 percent and above are special rates for auto sector and alcoholic beverages. The edible oil, gold, silver, betel leaves and mobile phones are subjected to the specific rates of duty.
A proposal is under consideration to reduce the gap between the customs tariff slab of 3 percent and 11 percent. There is a possibility that a new slab between 3 and 11 may be created to narrow down this gap. The guiding principles for budget 2019-20 included customs tariff rationalisation, exports-led growth, trade facilitation and ease of doing business, revenue generation and relief to the common man.
Under the budget policy for 2019-20, the high tariff on import of non-essential and luxury goods would continue till trade balance improves significantly. The FBR has proposed lower duty structure on socially sensitive items like vegetable, pulses, etc and complete rationalisation of regulatory duties in three years period. The FBR has also proposed exemption schemes to be phased out and minimising concessions and exemptions regime i.e. size of the Fifth Schedule would be gradually reduced over a period of three years. The Customs Tariff Rationalisation Policy for 2019-20 further revealed that sectors reviewed by the tariff rationalisation committees (TRCs) are chemicals and plastics, paper and paper board, textile sector, steel sector, machinery and capital goods, and home appliances and mobile phone sector. The customs tariff rationalisation would also include tariff changes only in accordance with the notified sectoral policies, cascading principle with merit-based exceptions to safeguard industry and customs tariff to remain an instrument for industrial and exports-led growth.
The cascading principle included lower rate on raw material and highest rate on finished/consumer goods and in-between rates on intermediately products and they would be applied according to the nature i.e. whether the imported item is a value-added raw material, semi-finished intermediary goods, etc.
Local manufacturers demand more tariff gap between raw materials and finished goods (tariff protection), while consumers of imported raw materials/ intermediary goods demand lower tariffs on grounds of insufficient local supply/ monopolistic treatment, quality issues and varying specifications of same item (not locally produced).