Commercial Importers protest against inclusion of raw materials in finished goods schedule

Karachi, June 22, 2020: Amin Yousuf Balgamwala, chairman PCDMA & former director of Karachi Stock Exchange has expressed serious concerns over the inclusion of certain industrial raw materials in the category of finished goods in the budget 2020-21 and demanded re-entry of industrial raw materials in Part 2 by maintaining the previous rate of income tax.

In letters sent to Abdul Razzaq Dawood, Advisor to the Prime Minister on Trade and Investment and to the FBR’s Anomaly Committee, chaired by Ashfaq Tola, chairman PCDMA said that there are three parts of Schedule 12 of the Finance Bill 2020. Part One contains capital goods, Part 2 contains raw materials and Part 3 contains finished goods.

Surprisingly, the government has removed several raw materials of chemicals & dyes from Part 2 and inclusion in the Part 3, which is for finished goods. The income tax rate in Part 3 is 5.5 percent, while in Part 1 it is 1 percent and in Part 2 it is 2 percent.

“The raw material of chemicals & dyes was earlier listed in Part 2 but adding many raw materials in Part 3 would result in tax on the raw material in terms of finished goods. The rate of income tax on imported goods has been increased by 3.5 percent which will exclude to commercial importers from the import business”, he pointed out.

He feared that if previous status of raw material not restored then it will lead to shortage of industrial raw materials and also disrupt the production activities which will ruin the exports. Amin Balgamwala further said that if the manufacturer imports industrial raw materials then the tax rate is less but when the same raw materials are imported by commercial importers to supply to the industries then more tax is being levied on them which is utter injustice.

“The manufacturers would take advantage of the lower duty and sell the imported industrial raw materials in the markets, which would result in severe financial losses to the commercial importers who import the raw materials by paying more duty”, he claimed.

PCDMA chairman demanded to remove chemical & dyes raw materials from PART 3 and inclusion again in Part 2 and the previous income tax rate of 2 percent be maintained. He said that the tax rate for industrial and commercial importers should be the same as both import raw materials for industries so this distinction should be eliminated.

He urged to restore fixed tax regime for commercial importers and SRO 1125 also, said that it is already difficult to do business in the presence of coronavirus pandemic, so instead of creating problems, the government should make business easier so that industries can get cheap raw materials and the country’s exports can be boosted.

Balgamwala further said in the letters that there should be equal duty on all imported items in Chapter 3204 as different rates of duty would increase corruption. He suggested that a uniform duty of 5 percent be imposed on all imported items in Chapter 3204, otherwise the trend of misdeclaration would be promoted which would result in losses of government revenue.

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