Karachi, November 28, 2023 – The Federal Board of Revenue (FBR) has reported a 7.8 percent drop in customs duty collection during fiscal year 2022-23, attributing the decline to challenges arising from falling imports.
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Complete details of amendments made to Customs Act through Finance Bill 2023
Islamabad, June 9, 2023: Finance Bill, 2023 has proposed amendments to Customs Act, 1969, according to Pakistan Budget 2022-23 released on Friday.
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Finance Bill 2023 – Customs Duty Salient Feature
Following are the salient features introduced to Customs Duty through Finance Bill, 2023, according to Pakistan Budget 2023-24 revealed on Friday.
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Customs duty for motor vehicle kits of new models reduced to 15pc
The Federal Board of Revenue (FBR) has announced a reduction in customs duty to 15% for components used in the assembly or manufacture of cars in any kit form.
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Customs duty exemption, concession granted
KARACHI: The Finance Act, 2022 has amended provisions of Customs Act, 1969 to grant exemption and concessions from customs duty.
Following are the exemptions and concessions of customs duty:
Exemption of Customs Duty and Additional Customs Duty
READ MORE: Commodities’ illegal movement to be treated as smuggling
Customs Duty (CD) leviable on the import of following categories of items / sectors is exempted for incentivizing the respective sectors:
– Machinery and capital goods for mechanization of farming including machinery pertaining to irrigation, drainage, harvesting, plant protection etc.
– Specified raw materials used for manufacturing of LED lights, LED bulbs (including parts thereof) and brush ware.
– 26 Active Pharmaceutical Ingredients for incentivizing Pharmaceutical manufacturers.
– Raw materials for manufacture of first aid bandages.
READ MORE: Special tax regime for pharma sector introduced
– Membranes for filtering / purifying water.
– The drug ‘Grafalon’ and gadget ‘Irisvision’.
– Raw materials of Ivy leaves extract powders.
– Motor spirit.
– Cinematographic equipment imported during the period commencing on the 1st July, 2018 and ending on the 30th June, 2023.
– Bullet proof vehicles and jammers imported by Federal Government, Provincial Government or such states and territories as are or may be included in Pakistan.
READ MORE: Defacing sales tax invoice declared as offence
– Smartphones including those in CKD/SKD condition (subject to certain conditions prescribed for import of CKD/SKD units).
In addition to CD, Additional Customs Duty (ACD) is also exempted on import of the following goods:
– Raw materials imported by paper sizing industry and chlorinated paraffin wax industry and manufacturers of aluminum conductor composite cores.
– Stamping foils for manufacturing of optic fiber cables.
– Aluminum paste and powder imported by the Coating industry.
– Guts, bladders and stomachs of animals.
Reduction in Customs Duty and Additional Customs Duty
CD leviable on import of following goods is reduced:
– Specified categories of other woven fabrics and artificial flowers / foliage of other materials imported by manufacturers of footwear.
READ MORE: FBR to collect 3% further tax on supply to inactive taxpayer
– High-density fiber (HDF) boards of wood or other ligneous materials
– Specified fibers of polypropylene.
– Through the Finance Bill, CD was proposed to be reduced on 10 categories of direct and reactive dyes. Such reduction in CD has now been restricted to 6 categories through the Act.
In addition to CD, ACD, leviable on import of following goods is also reduced:
– Direct and reactive dyes.
– Glycerol crude and Glycerol for the coating industry.
– Goods pertaining to Aluminum, polymers of ethylene, Biaxially Oriented Polypropylene (BOPP) used by the packing industry.
– Adhesive, Epoxide resins, Filter media/ paper, Non-woven fabric media and Steel plates / sheets of prime quality imported by manufacturers of filters, other than automotive.
– Organic composite solvents and thinners imported by manufacturers of Dibutyl Orthophthalates.
– Plywood, veneered panels & similar laminated wood, poly (methyl methacrylate) and cyanoacrylate.
– Flavoring powders for food preparation for snacks manufacturers.
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Pakistan may increase normal sales tax rate to 18%
Pakistan is likely to increase sales tax rate to 18 per cent in the federal budget 2022-2023, which is scheduled on June 10, 2022. The existing normal sales tax rate is 17 per cent.
According to Budget Preview 2022/2023 issued on Thursday, analysts at Arif Habib Limited said the government is considering to raise an additional Rs400 billion – Rs450 billion during next fiscal year 2022/2023.
READ MORE: PM Shehbaz assures favorable measures on CNIC requirement
For this purpose, the analysts said, the government plans to raise revenue from the following measures:
- Increase in general sales tax (GST) from 17 per cent to 18 per cent
- Increase in GST on fertilizer products from 2 per cent to 17 per cent
- Increase in corporate tax rate / windfall levy by 3 per cent
- Incremental super tax of 3 per cent on commercial banks
- Increase in personal income tax
- Increase in federal excise duty (FED) by Rs 500/ ton on cement
- Increase in FED on tobacco
- Increase in Customs Duty from 2 per cent to 6 per cent on edible oil imports
- FBR’s administrative measures
- Imposition of additional taxes on real estate.
The analysts said that the fiscal policy should remain supportive of the economy in the short term, with targeted measures to collect tax and reduce expenditure, backed by credible medium –term fiscal consolidation plan.
READ MORE: New tax measures likely in budget 2022-2023
“However, in short term, need of the hour is taking tough fiscal measures given the tight fiscal situation.”
Pakistan achieved total revenue growth of 18 per cent during the first nine months (July – March) 2021/2022 to Rs5.4 trillion up from Rs4.6 trillion in the corresponding months of the last fiscal year, which comes out to be 9.2 per cent of the GDP against 9 per cent in the same period last year.
The analysts said that the total tax revenue collection was up by 33 per cent year on year (YoY) to Rs4.82 trillion while non-tax revenue of Rs1.05 trillion, displayed a decline of 14 per cent YoY.
READ MORE: Pakistan Budget 2022-2023 – estimates
The government expects the tax revenue collection to settle at Rs 7.9 trillion for FY23b, a jump of 19 per cent YoY compared to tax revenue of pKR 6.6 billion for FY22E. Likewise, to ensure prudent fiscal management, IMF also proposed stringent FBR tax revenue target of Rs 7.26 trillion compared to Rs 6.1 trillion for FY22E, which is much needed given the overall fiscal situation of the economy. Also, from the government’s standpoint, in order to ensure growth moderation, the analyts believe that the government will not shy away from putting additional major tax burden on the different economic classes of the community and might take some non-populous taxation measures in order to ensure the same.
The government is planning to raise an enormous total tax collection target of Rs 7.9 trillion through new taxes worth Rs 400-450 billion, additional taxes on higher income salary bracket, raising Rs 4.7 trillion through indirect tax measures, and the rest is likely to be collected from administrative measures and by bringing more people under the tax net. They believe direct tax collection will likely increase due to broadening tax base as government would be targeting to increase the number of income tax filers in the upcoming year.
READ MORE: Compliance cost much higher for corporatization: PSX
Indirect tax contributes around 60 per cent to the overall tax revenue coming in mainly from three major heads including Custom Duty, Sales tax and Federal Excise Duty which contributed around 25 per cent, 67 per cent and 8 per cent, respectively to the total indirect tax collection during 9MFY22. Share of sales tax and custom duty increased in 9MFY22 due to surge in imports of various commodities amid an uptick in aggregate demand of the economy. Going forward, indirect tax contribution is likely to increase by almost 20 per cent (Rs 4.7 trillion) in FY23B due to higher sales tax while higher import bill is likely to earn more tax revenue from custom duties.
Government expects non-tax revenue collection to increase by 12 per cent to Rs 1.6 trillion in FY23 with Petroleum Development Levy (PDL) expected to settle at around Rs 500 billion. The analysts at Arif Habib Limited believe the collection in lieu of PDL is likely to be higher YoY in FY23 with an assumption that government increases it by Rs – 22/litre on MS and HSD. Currently PDL stands at Rs 125 billion during 9MFY22. Another constituent that is likely to support the overall non-tax revenue is expected to be State Bank’s profits. They expect it will be more than last year’s number mainly due to higher interest rates during July – March 2021/2022.
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FBR exempts customs duty on import of oxygen gas
The Federal Board of Revenue (FBR) has issued an exemption on customs duty for the import of oxygen gas and oxygen cylinders.
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Customs duty collection from imported vehicles surges by 95%
Official data released on Monday indicates a remarkable upswing in the collection of customs duty from imported vehicles during the fiscal year 2020/2021, reflecting a staggering 95 percent growth, reaching Rs111 billion. This surge is in stark contrast to the Rs56.85 billion recorded in the preceding year.
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Budget 2021/2022: Duty, taxes abolished on cars up to 850cc
ISLAMABAD: The government has announced abolishing duty and taxes on locally manufactured and imported cars with engine capacity up to 850cc to enable low earning families to afford motor vehicles.
Finance Minister Shaukat Tarin while presenting federal #budget 2021/2022 on Friday announced duty and tax incentives for sale and import of motor cars with engine capacity up to 850cc.
The finance minister made following announcement:
Withdrawal of FED and Reduction in Sales Tax on Locally Manufactured cars up to 850 cc: Rising prices of locally manufactured small cars is a major concern for low earning families. Accordingly, it is proposed that small cars upto 850 cc capacity may be exempted from levy of FE besides reducing Sales Tax rate from 17% to 12.5% and withdrawing value added tax.
Exemption from Withholding Tax on Import: It is proposed that no tax may be collected on imports of books, journals, agriculture equipment and motor vehicles in CBU condition upto 850 cc.
To incentives this sector further additional custom duty and regulatory duty on CBU import of vehicles upto 850cc are being exempted.
Whereas relief to existing manufacturing industry and new models is also being provided by removing Additional Customs Duty (ACD) and rationalizing the tariff structure.
Due to these targeted interventions the middle class of this country will be able to afford a car of this specific category and will accrue the benefits of governments flagship projects of “Meri Gari Scheme” which will enable many countrymen who wish to graduate from motorcycle to own their car by providing small car at an affordable price.
Moreover further incentives in the form of reduction of customs duties are also being provided to electric vehicles for one year to promote the culture of electric vehicle in Pakistan.
Similarly, keeping in view the changing international motorcycles trend usage of local manufacturing of heavy motorcycles and specific categories of trucks and tractors are also being incentivised by rationalizing the tariff structure.
Tax Incentives for promoting electric vehicles: To address environmental issues, reduce reliance on gasoline and provide cheaper source of transportation to public, Government of Pakistan is encouraging the manufacture and use of electric vehicles.
For this purpose, various tax exemptions and concessions are being proposed, which include tax exemption on import of CKD kits for local manufacturing of electric vehicles, reduction in sales tax rate on locally manufactured electric vehicles from 17% to 1%, withdrawal ofvalue addition tax on import of electric vehicles and CKD kits and withdrawal of federal excise duty on 4-wheelers electric vehicles.
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Budget 2021/2022: salient features of budgetary measures in Customs Duty
ISLAMABAD: The federal government on Friday presented budget 2021/2022 and announced measures in regime of customs duty.
GUIDING PRINCIPLES
(a) Remove anomalies in cascading structure of tariff
(b) Promote and protect domestic industry by introducing targeted interventions
(c) Enhance import-substitution by rationalizing tariffs on industrial raw materials / intermediate goods
(d) Facilitate export-oriented manufacturing by reviewing the existing exemption regimes & export schemes
INDUSTRIAL RELIEF MEASURES
1. Reduction / exemption of CD, ACD & RD on import of goods falling under 589 PCT codes to incentivize the textile industry.
2. Reduction / exemption of CD, ACD & RD on import of flat rolled products of HRC and stainless steel.
3. Reduction / exemption of CD and ACD on raw materials and intermediary goods and point of sale machines falling under 328 tariff lines as a consequent of tariff rationalization.
4. To incentivize the pharmaceutical sector and to keep the prices stable in the market, –
Exemption of CD & ACD on more than 350 APIs
Plant, machinery and equipment subject to concessionary rate of 5%
Exemption of CD & ACD on raw material of auto-disable syringes and Reduction in tariff on finished auto-disable syringes
5. Reduction / exemption on inputs / raw materials of food processing industry.
6. Reduction of CD & ACD on uncoated paper and paperboard for printing and graphic arts industry.
7. Reduction / exemption of CD & ACD on Vaccines for veterinary medicines and feed additives to incentivize the dairy sector.
8. Reduction / exemption of CD & ACD on goods falling under more than 100 PCT codes relating to Tourism industry.
9. Reduction of duties on raw material/inputs of footwear industry.
10. Reduction / exemption of CD & ACD on inputs for poultry industry.
11. Reduction / exemption of CD & ACD on raw material for manufacturer of aseptic plastic packaging.
12. Exemption of ACD on import of raw materials for cables / optical fiber manufacturers.
13. Reduction / Exemption of CD & ACD on raw materials for Paint Industry.
14. Reduction / Exemption of CD & ACD on raw materials for Chemical and Artificial Leather Industry.
15. Reduction / Exemption of CD & ACD on inputs for Electronics Manufacturing Industry.
16. Reduction / exemption of CD & ACD on raw materials / inputs of furniture, coating, boiler manufacturing industry, bobbins and cops manufacturing industry etc.
RELIEF TO COMMON MAN
17. Reduction of ACD on goods falling under 2436 tariff lines pertaining to 20% customs duty slab from 7% to 6%.
18. Extension in exemption from customs duties on import of COVID-19 related items for further six month.
19. Exemption of CD &ACD on Inputs of Ready-To-Use Supplementary Foods (RUSF) and Ready-To-Use Therapeutic Food (RUTF).
20. Exemption of CD & ACD on 06 life-saving drugs.
21. Enhance the value of unsolicited gifts through post or courier from Rs.20,000 to 30,000.
22. Exemption of CD & ACD on import of grain storage hermetic bags and cocoons.
23. Rationalization of tariff structure on auto sector.
REVIEW OF REGULATORY DUTY (RD) REGIME:
24. Rationalization of RD on import of Mobile Phones to encourage import substitution
25. Increase in rates of RD on import of non-essential / luxury items to support local industry.
26. Reduction of RD on import of cocoa paste, butter and powder being industrial input goods.
EXPORT FACILITATION MEASURES:
27. To ease of doing business, a new Uniform Export Facilitation Scheme is being proposed. The existing schemes shall be phased out in next two years.
28. Bond to Bond Transfer of goods through WeBOC without prior approval of the Collector is being proposed to be allowed.
29. Reduction of RD on export of molasses, skin and hides to boost positive image of the country with our important trading partners across the world.
MISCELLANEOUS
1. Establishment of Border Sustenance Markets to mitigate the problems faced by the people residing in border areas due to fencing and counter-smuggling measures.
LEGISLATIVE CHANGES:
1) Introduction of a concept of Common bonded warehousing to encourage Small and Medium Enterprises.
2) Empowering Collector of customs to determine customs value there by facilitating trade.
3) Enabling the Director General Valuation to take appropriate decision on appeal and capping the time limit for such proceedings. Facilitation of trade by avoiding time consumed in unnecessary litigations.
4) Allowing the importers to amend manifest till berthing event without seeking approval from custom authorities and hence ease of doing business.
5) Enable customs authorities to allow bonafide amendment in into-bonds goods declaration and thus facilitate trade.
6) Allowing the Collector to extend warehousing period for six months. Reducing the processing time of the requests and promoting ease of doing business.
7) Reducing the time limit allowed for decision of the cases wherein the impugned goods are lying at sea ports, airports or dry-ports and thus decreasing the cost of doing business.
8) Enable customs authorities to issue correction / corrigendum certificate in case of genuine / obvious error and facilitate trade.
9) Inclusion of other law enforcement agencies for the purpose of reward and increasing their motivation.
10) Affording opportunity of being heard to the registered users of WeBOC in accordance with the canons of natural justice.
11) Increasing the period of validity of advance ruling from the current one year to three years in accordance with international benchmarks and facilitating trade thereof.
12) Provision for the classification committee to avoid unnecessary litigation on account of classification disputes and consequently decreasing the cost of doing business.
13) Removal of fine in case of delay in filing of goods declaration and thereby providing ease of doing business.
ENFORCEMENT FEATURES:
1) Inclusion of master bill of lading and certificate of origin in the existing definition of document to discourage origin fraud.
2) Inclusion of the retailing in definition of smuggling to discourage retailers from selling smuggled goods.
3) Making shipping lines responsible for re-export of banned items imported in commercial quantities.
4) Increasing the pitch of fine in case of non-placement of invoice and packing list in container to inculcate compliance.
5) Discouraging smuggling by denying release of vehicles used repeatedly for smuggling against redemption fine.