FBR’s Biannual Review: Rupee appreciation behind flat growth in customs duty collection

ISLAMABAD: The Federal Board of Revenue (FBR) on Friday said that the appreciation in rupee against dollar during last fiscal year resulted in almost flat growth in collection of customs duty.
In its Biannual Review for January to June 2014, the FBR said customs duty contributed around 17.4 percent and 10.6 percent in the indirect taxes and federal taxes respectively during 2013-14. The base of customs duty is dutiable imports. Any fluctuation in the tax base affects the collection of customs duty.
Dutiable imports constituted around 38 percent of the total imports during 2013-14. It reflects high level of exemptions of imports from customs duty. The duty free imports grew by 5.9 percent while dutiable imports have grown by 7.6 percent. The gross and net collection from customs duty has been Rs 249.7 billion and Rs 241 billion respectively during 2013-14. The difference between the gross and net collection is the refund/rebate payment. In fact, Rs.8.7 billion has been paid back as refunds/rebates during the year. The net collection of customs duty yielded a growth of around 1 percent. “One of the major reasons of this low growth is appreciation of rupees against dollar,” the FBR said.
There is a considerable degree of concentration of collection of customs duty in few items i.e. vehicles, edible oils, petroleum, machinery and plastic contributed around 45 percent of the total collection from customs during 2013-14.
Similarly, 52.3 percent of the total collection of customs duty has been realized from 10 major commodities groups (PCT chapters).
Automobile (Ch:87) is the top revenue spinner of customs duty. The collection from automobile has dropped by 14.2 percent during 2013-14 due to decline of 6.7 percent in the value of dutiable imports. The customs duty mainly emanated from motor cars (87.03) which are mostly subject to tariff peaks. Dutiable imports of motor car etc have declined by 17.6 percent which has adversely affected the collection from this head by 19 percent. As a result, declined in collection has also dropped the share of vehicles in total customs duty collection from 16.9 percent to 14.5 percent in total customs duty in 2013-14.
Edible oils (CH:15) is the second major source of revenue generation of customs duty. During 2013-14, a growth of 2 percent in the collection from edible oils was recorded as compared to the collection during FY: 2012-13. On the other hand, the value of dutiable imports was declined by 5.7 percent. The edible oils are mostly subject to specific rate of duty; therefore, the growth in the value of dutiable imports has no impact on revenue collection.
Petroleum products have been the 3rd major revenue source of customs duty. Some of the major petroleum items like crude oil, furnace oil, motor spirit etc are exempt from customs duty. The dutiable imports have recorded negative growth by 16.1 percent. Similarly, the customs duty from POL products has dropped by 17.8 percent. The customs duty from petroleum products mainly depends on the level of contribution by High Speed Diesel Oil (HSD). In fact, the value of dutiable imports of HSD has declined by 13.1 percent while its collection has also dropped by 18 percent.
The dutiable imports of mechanical machinery (CH:84) and electrical machinery (CH:85) have grown by 10.8 percent and 2.7 percent respectively while collection of customs duty grew by 11.2 percent and 8.9 percent respectively.
The collection from plastic items (CH:39) has increased significantly by 25.3 percent. This growth is mainly attributable to growth of 26.3 percent in dutiable imports during 2013-14.
As far as iron and steel (CH: 72) is concerned, the collection has declined by 17.5 percent against decline in dutiable imports by 10.8 percent. The remaining items of major spinners have recorded positive growths in the collection due to growths in their respective dutiable imports.

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