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KARACHI, July 17: Businessmen and industrialists have identified over 76 irritants/anomalies in the 2004-2005 budget in which over 60 relate to customs duty, nine to sales tax, two to income tax and five to central excise duty.
Anomaly Committee of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has recently sent a 17-page post-budget memorandum 2004-2005, containing the anomalies, to the Ministry of Finance and the chairman Anomaly Committee of the government recently.
In 2003-2004 budget, the business community had found over 87 anomalies/irritants in which 40 related to customs duty, 26 to income tax and 21 to sales tax.
If compared with anomalies in the last fiscal budget, it seems that the government has given due preference to the business community's suggestions and proposals specially in sales tax and income tax segments before finalizing the budget 2004-2005.
In their proposals to the FPCCI, local companies and various trade bodies have sought sufficient cushion between raw materials and finished goods so that local industries could compete.
These irritants/anomalies are likely to be discussed at length during the chairman, Central Board of Revenue (CBR), Abdullah Yousuf visit to the Federation House on Monday.
Some of the irritants/anomalies in customs duty, sales tax, income tax and central excise duty, contain in the memorandum, are as under:
CUSTOMS: Pakistan Vanaspati Manufacturers Association (PVMA) has pointed out that the government has imposed Customs Duty at Rs9,000 per ton if imported by M/s Evian Oils and Fat Company as compared to Rs9,500 to be imported by other companies. This is a clear anomaly by giving dispensation of Rs500 per ton to Evian. PVMA urges the government to provide level-playing field.
All Pakistan Textile Mills Association (Aptma) points out that the import duty on high speed diesel engine has been cut to 20 from 25 while the duty on diesel engine spare parts has been increased to 35 from 25 per cent. It is an anomaly and against the government policy that on machinery the duty would be minimum and duty on spare parts would be less than CBU unit of machines so that assembling in the country would be viable. Aptma suggests the rate of duty on high speed diesel engine at 10 per cent so that local assemblers have a cushion of 10 per cent in customs duty.
Lahore Chamber of Commerce and Industry (LCCI) and Pakistan Spare Parts Importers and Dealers Association have urged the government to fix 10 per cent import duty on smuggling prone items (not manufactured in Pakistan) like diesel fuel pumps, piston rings, cylander liners, oil seals, crown wheel and pinion, V-belts, fan belts, transmission gear, crank shaft, main and big end bearing, auto bulbs, gasket and packings, ignition of coils, clutches, disc and covers, automotive safety glasses, hydraulic break, sealed beam lights, etc., from 35 per cent.
Pakistan Footwear Manufacturers Association (PFMA) has said that the import duty on thermoplastic rubber has been raised to 20 from 10 per cent whereas the duty on polyol has been cut to 20 from 25 per cent while duty on hardener has been maintained at 25 per cent. Import duty on finished footwear is 25 per cent. PFMA suggested duty rate on three items at five per cent so that local industry could survive from total closure due to cheap import and dumping of footwear.
Lucky Plastic Industries and Artificial Leather and PVC Sheets Manufacturing Association have proposed the rate of import duty on PVC resin, polyurethane resin in solution and zinc stearate at 10 from 25 per cent.
Pakistan Plastic Manufacturers Association (PPMA) has suggested 10 per cent customs duty rate on polyethylene teraphatalate (yarn grade and bottle grade) from 17.5 and 20 per cent while duty on blow moulding machinery should be brought at five from 10 per cent.
Gatron Industries has called for bringing customs duty on conning oil (raw material used in making of polyester filament yarn) be cut to 10 from 20 per cent.
Candyland Ismail Industries has suggested five per cent customs duty rate on sugar including chemically pure luctose, glucose and fructose, cocoa beans, cocoa paste, cocoa butter, cocoa powder from the current rate of 10-25 per cent.
Dollar Industries asks the government to allow import of high precession electrogalvanised iron wire at concessionary rate of duty since the local industry's product is not of required specification. Duty on polystyrene, a raw material used in making of ball points and fountain pens, has 20 per cent duty which should be cut to 10 per cent since it is not produced by any company.
The FPCCI has called for bringing customs duty on raw materials used in ceramic industries like glass frit, ceramic stains, liquid lustre and packing material at the rate of zero and five per cent from five to 25 per cent.
In IT industry, the government has exempted processor, mother board, hard drive, CD rom, casing, floppy disk drive, key board and mouse from customs duty while items like RAM, VGA/AGP, Modem, LAN monitors, printers, etc., still attract five per cent customs duty, which should be exempted to facilitate local assemblers, FPCCI said.
Six bicycle chain making industry has been totally closed. Demand is currently being met through smuggling. It is suggested that rate of duty on raw material making sub-components be cut to zero from five and the rate of duty on sub-components of chain be reduced from 10 to five per cent.
Import duty on tractor tyres be cut to 10 per cent while rate of duty on tube of bus and truck tyres be decreased to 10 per cent. The government has only cut the rate of duty on truck and bus tyres to 10 per cent and not on its tube.
The FPCCI has urged the government to do away with the restriction of binding the units located at Export Processing Zone Authority (EPZA) to export 20 per cent of their products to the tariff area with immediate effect.
SALES TAX: On zero-rating on imports of cotton under SRO(I) 2004, which has exempted local supply of ginned cotton from sales tax whereas import of ginned cotton is not exempted from sales tax. All Pakistan Textile Mills Association (APTMA) has sought clarification to provide level playing field to the local suppliers and importers of ginned cotton.
The same SRO has not mentioned exemption of sales tax on cotton waste and the levy of sales tax on cotton waste will increase the cost of production of those firms using cotton waste as raw material for making yarn. Aptma calls for exemption of sales tax on cotton waste.
Hyderabad Chamber of Commerce and Industry (HCCI) has sought withdrawal of 15 per cent sales tax on cotton seed (being used for extracting vegetable oil) and said that sales tax be charged only on finished oil.
On search without warrant under Section (40)A - FPCCI has proposed that the Section should be deleted/held in abeyance. FPCCI said that discretionary powers given to collector in respect of fake invoices is against the spirit of the law. A purchaser can only obtain registration certificate of the supplier but he could not ascertain whether the tax been has been deposited or not. FPCCI said that the Sales Tax department should publicise the list of blacklisted or suspected units on the web so that a purchaser can know about it.
INCOME TAX: Pakistan Advertising Association (PAA) points out that the government has levied five per cent presumptive tax on commission income of advertising agents and it is treated full and final discharge of liability. The association has proposed to withdraw such tax and keep the advertising profession in the normal tax regime.
As per Section 177, now the Commissioner as well as Central Board of Revenue (CBR) shall select persons for audit in accordance with the criteria laid down by the CBR. The Board will keep the criteria confidential. PAA has proposed that the structuring of discretion should be transparent and the criteria should be part of the returns to know the admissibility and avoid non- admissible for growth oriented tax strategy.
CED: The government has made mandatory that retail prices should be indicated on the imported goods/products. As per Central Excise Order 1/2003, importer may have the option to take their consignment into bond to print retail price at the time of ex- bonding.
The FPCCI has proposed for removal of this condition as it is not practical. Retail price should be indicated on the documents only in case of import. Foreign suppliers will not print retail price at their end because they are producing goods in bulk and not for Pakistan only.
Pakistan Ship Agents Association (PSAA) has suggested to delete the services of shipping agents from CED as the agents get nominal charges, which does not suggest bringing them in this mode of record keeping system.
The SRO 502(I)2004, dated June 12, has imposed 15 per cent CED on edibles. The epoxidised soyabean oil is also misunderstood as edible oil while it is used as plastiser/stabiliser in PVC products. Crescent Business Associate has proposed to specify HS Code 1518.0000 (epoxidised soya bean oil) not attracting to the said duty under SRO 502.
On CED cut in imported greese (HS code 2710.1992) from 50 to 25 per cent, Pak Grease Company has asked the government that CED may be levied on specified rate of duty in line with the levy of POL products viz-e-viz lubricating oil where it is charged at specific rate of duty at the rate of Rs7.15 per litre. Mineral gas is charged at Rs8 per kg or 10 per cent on the retail price which ever is higher. Giving the rationale, the company said that the proposed solution will increase the competitiveness of the industry.
Pakistan International Freight Forwarders Council has requested withdrawal of 15 per cent CED on freight forwarding business as the levy has increased the cost of export.
