ISLAMABAD: With its focus firmly fixed on the upcoming budget, the government has decided in principle to reduce Customs Duty (CD) on approximately 3,000 tariff lines — mostly raw materials and intermediate goods — to accelerate industrial growth ahead of the next general election.

The tariff reduction on these tariff lines will directly benefit 40-50 industries including textile, pharma, engineering, footwear, and chemicals. The tariff lines are selected in a fashion to mitigate the impact of the Covid-19 pandemic and encourage import substitution of major consumer items in the country.

As per decisions, there will be major reduction in duty on 600 tariff lines while rate of additional customs duty may be reduced on more than 2,400 tariff lines in the budget 2021-22 to reduce cost of doing business, documents seen by Dawn on Thursday showed.

Government studies show that tariff rationalisation plan of the government has led to industrial growth in the country. Exemption of duty on raw materials leads to its bulk import and subsequent exports of those industries.

The government has established the Tariff Policy Centre (TPC) chaired by chairperson National Tariff Commission in the year 2019 and shifted tariff policy-setting powers from the Federal Board of Revenue (FBR) and to the Tariff Policy Board (TPB) led by Commerce Adviser Abdul Razak Dawood. The TPC proposed tariff reduction on products which was approved by the TPB.

On TPC’s recommendation, the government exempted three per cent duty on 1,638 tariff lines in the 2019-20 budget and 2pc Regulatory Duty on 2,000 tariff lines in the 2020-21 budget. “We will continue this exercise in coming years to remove tariff on raw materials and inter-mediate goods”, an official source in the Ministry of Commerce told Dawn.

The source said the tariff centre has done a lot of work in the last two and half years. “We want to continue this work to spur industrialisation across the board,” the source further said.

Under the 600 tariff lines, it has been agreed to withdraw 3pc customs duty on 150-200 tariff lines, reduce duty from 11pc to 3pc on 100 tariff lines. “This will be across the board changes which will create environment for industrialisation,” the source said, adding that the proposed measures will reduce cost of production for domestic industries especially export oriented industries in the textile sector.

The tariff policy board has already done study on value chains of textile and plastic industries. The proposed measures in the light of recommendations will boost exports of value-added textile from the country.

Similarly, the government has proposed drastic reduction in duty on import of raw materials for engineering goods. The duty will also go on import of specific machinery, raw materials and intermediate goods for pharmaceutical sector and footwear. Duty will be drastically reduced in the upcoming budget on several products which will benefit 40-50 industries.

The tariff policy board has also proposed to reduce Additional Customs Duty (ACD) from 7pc to 4pc on more than 2,400 tariff lines and gradually bring the duty to the original level. However, the Customs department is not willing to accept this proposal on the plea that it will lead to reduction in CD collection.

There are several hundred raw materials, intermediate goods which were placed in the slab of 20pc, which is the highest. It is high time that government only place finished products under this slab. The ACD was increased to 4pc from 2pc on products at slab 16. It has also been proposed to reduce it and bring it to original level.

Published in Dawn, May 28th, 2021