FBR issues SROs to withdraw additional, customs duty on import of cotton

ISLAMABAD: Federal Board of Revenue (FBR) has exempted customs duty and additional customs duty on import of cotton for the period of February 01 to June 30, 2019.

The FBR issued SROs No. 107 and 108 (I)/ 2019 on Monday to withdraw the customs duty and additional customs duty on import of cotton.

The Economic Coordination Committee (ECC) of the Cabinet in its meeting held on January 15, 2019 decided to withdraw 3 percent customs duty and 2 percent additional customs duty on import of cotton to facilitate textile export sector.

The ECC approved withdrawal of 3 percent customs duty, 2 percent additional customs duty and 5 percent 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 percent was abolished in 2014-2015 and customs duty of 1 percent was imposed along with the 5 percent sales tax.

Later on 1 percent slab was made 2 percent and then 3 percent along with the 2 percent additional duty to make it 5 percent. Currently, cotton is subject to 3 percent customs duty, 2 percent additional customs duty and 5 percent 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The customs duty and sales tax were withdrawn again with effect from January 8, 2018 but were re-imposed from July 15, 2018 on the request of Ministry of National Food Security and Research (MNFSR) on May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 informed 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 percent if compared to last year and a decrease of 24 percent 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.

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