Pakistan Introduces New Rates of Additional Customs Duty

Pakistan Introduces New Rates of Additional Customs Duty

Karachi, June 30, 2024 – Pakistan has introduced new rates of additional customs duty on hundreds of imported goods for the fiscal year 2024-25.

The Federal Board of Revenue (FBR) issued SRO 929(I)/2024 on Sunday, which will supersede the previous notification SRO 967(I)/2022, dated June 30, 2022. This measure is part of the government’s ongoing efforts to boost revenue and manage the economic challenges facing the country.

According to the new SRO, additional customs duty will be levied on the import of goods specified in the First Schedule to the Customs Act, 1969, at varying rates. The details are as follows:

1. Two Percent Duty: Goods falling under tariff slabs of 0%, 3%, and 11%, as well as goods imported under S.R.O. 655(I)/2006 and 656(I)/2006, dated June 5, 2006, will attract an additional customs duty of 2%.

2. Four Percent Duty: Goods under the 16% tariff slab will incur a 4% duty, except for goods under PCT codes 5516.9300 and 5516.9400, which will be charged at 2%.

3. Six Percent Duty: A 6% additional customs duty will be applied to goods under the 20% tariff slab.

4. Seven Percent Duty: Goods under the 30% tariff slab and higher, as well as slabs of specific rates, will be subject to a 7% duty. However, certain goods such as specific oils and fats (PCT codes 1507, 1511, 1512, 1514) and certain vehicle components in CKD condition, will be charged at a reduced rate of 2%.

The value of goods for the purpose of this levy will be determined under section 25 or section 25A of the Customs Act, 1969.

The FBR has also specified several exemptions where the additional customs duty will not apply. These include:

• Import of Seeds and Essential Commodities: Items such as seeds and spores for sowing, motor spirit, high-speed diesel oil, liquefied natural gas, LPG, polymers of ethylene and propylene, cotton, solar panels, and fertilizers.

• Machinery for Manufacturing: Plant and machinery used in the production of goods, as classified under Chapter 84 and 85 of the Customs Act.

• Special Import Categories: Imports under Chapter 99 of the Customs Act, the Fifth Schedule of the Customs Act, the Baggage Rules, and specific SROs related to manufacturing, production, and temporary importation schemes.

Additionally, the FBR has provided relief for certain vehicles and components. For instance, electric vehicles (2-3 wheelers) and light commercial vehicles in CKD condition up to 1,000cc will enjoy reduced rates. Vehicles in CBU condition up to 850cc are also exempt from the additional customs duty.

The notification aims to balance the need for increased revenue with the economic realities faced by various sectors. It includes specific concessions for industries crucial to Pakistan’s economic development, such as manufacturing and renewable energy.

The new rates of additional customs duty are set to take effect from July 1, 2024, and will remain in force until June 30, 2025, unless rescinded earlier. This move is part of the broader fiscal strategy to enhance revenue collection and stabilize the economy, amidst ongoing negotiations with the International Monetary Fund (IMF) for a potential bailout package.

The introduction of these new rates underscores the government’s commitment to fiscal reforms and economic stabilization. However, it also highlights the delicate balance policymakers must strike between generating revenue and supporting economic growth. As the new fiscal year approaches, businesses and consumers alike will be watching closely to see how these changes impact the broader economic landscape.