KARACHI: Business community has underscored the need of tariff rationalization, in the forthcoming Federal Budget 2020-21, to facilitate business and protect domestic production.
Chairman United Business Group Shaikh Khalid Tawab said tariff was used in Pakistan just to collect the revenue instead of controlling imports and protecting domestic industry, while globally the aim of tariff is to curtail imports, protect domestic industry, improve competition, employment generation, attract investment and improving balance of payment.
“Tariff structure in Pakistan is much complicated due to multiple taxes, concessionary SROs and different types of regulatory duties, which promote under-invoicing, smuggling and mis-declaration. High import tariff create distortions and affect competitiveness of manufacturing sector by increasing cost of doing business”.
Industrial community has underlined the need of maintaining the principle of cascading. Industry should be split into various segments and standardized tariff slabs should be incorporated according to the segments starting from zero percent for base line materials & raw materials; 5 to 10 percent for intermediate goods; 15 percent for semi-finished goods; 20 to 25 percent for finished goods and consumer goods.
Moreover, the industrial users and commercial importers should be treated equally in tariff rationalization in order to remove mis-utilization of facilities.
President SITE Association of Industry Suleman Chawla said the value added textile export sector was facing severe liquidity crunch due to imposition of 17 percent sales tax in last budget whereby liquidity worth billions of rupees was stuck up with the government.
“COVID19 has added to miseries of the export sector amid global slowdown and in the wake of corona pandemic many global brands are facing bankruptcy whose impact will also fall on the export industry of Pakistan”, he added.
Chawla said small, medium enterprise (SME) sector was worst hit due to liquidity crisis and fearing closure, as they had no running capital to operate their industries, which once closed could not be revived.
SITE Association demanded to revive zero-rated sales-tax regime and reinstate SRO 1125 to provide pragmatic relief to exporters in this severest ever liquidity crunch of history.
President North Karachi Association of Trade and Industry (NKATI) Naseem Akhtar also favored restoration of SRO 1125 for five zero-rated sectors i.e. ‘no tax no refund’ for reducing production cost. “Imposition of 17 percent sales tax on export oriented industries is not a wise move,” he said.
To recall, FASTER refund system was introduced through which sales tax refunds for exporters were to be paid within 72 hours. However, FASTER system functioned below par. Around 30 percent of the exporters have not yet received the refunds against their claims filed in July 2019, which puts a question mark on the efficiency and transparency of FASTER system.
It may be mentioned here in April 2020, the goods’ trade deficit stood at0 $1.767 billion, up 18 percent from previous month. Imports declined 5.0 percent, while exports plunged by 24 percent.