KARACHI, Oct 3: The contradictory notifications issued by the Central Board of Revenue (CBR) are creating hurdles in the way of imports of capital goods such as plant and machinery. This is having an adverse impact at the time when investment in the country is picking up particularly in the textile industry.

The CBR has exempted plant and machinery, being imported for balancing, modernization and replacement (BMR), from customs duty and sales tax. This exemption given under SRO 554(I)/98 is inducing and accelerating investment needed for the industry in the shape of BMR.

However, this exemption from customs duty and sales tax is specific on import of plant and machinery not being manufactured locally.

Nevertheless, the benefits given by CBR under SRO 554(I)/ 98 are neutralized by another notification (CGO 12/2002) of CBR, which determines which plant and machinery is being manufactured locally.

The Customs General Order (CGO) issued about three months back has upset the entire BMR programme of the textile industry which has undertaken the task of inducting modern technology to meet the challenges of free market era, which starts from January 1, 2005, as textile quotas will cease to exist from Dec 31, 2004.

Without verifications the CBR has inserted entire chapters of various plants and machinery in the CGO thus indicating that they are being locally manufactured.

For example, chapter 84.43 deals with textile printing, but it specifies plant and machinery as an ancillary to printing. Exporters say that ancillary to printing is a very vast subject among others it includes laser engraving, wax engraving, inkjet engraving, scanners, automatic colour kitchen dispensing systems etc.

Therefore, such sophisticated equipments are not manufactured locally but the CBR’s notification (CGO) has presumed that they are being manufactured locally. It is more surprising that the CGO has also given the list and names of local manufacturers of these machines and suggested that exporters should contact them directly.

Shabir Ahmed, chairman (outgoing) Pakistan Bedwear Exporters Association (PBEA) told Dawn that when these manufacturers were contacted they did not have any clue of such equipments what to talk about the equipment manufactured locally.

In order to sort out the problem, he said the exporter or manufacturer has to approach the Engineering Development Board (EDB) for getting clarification whether a particular machine imported is manufactured locally or not.

He said it is the responsibility of the EDB to arrange protection for locally manufactured plant and machinery and has to investigate whether a plant is manufactured locally. But, instead of properly classifying the machinery, the Engineering Development Board prefers to recommend full chapter of a class of industry in the CGO showing that entire range of plant and machinery is being manufactured locally.

Shabir Ahmed lamented that after a lot of efforts and travelling to Islamabad the EDB issues clarification for CBR that a certain imported machine lying at the port is not being manufactured locally and the importer could avail the benefits given under SRO 554.

In the meantime, he said on so many occasions, plant and machines undergo demurrage and unnecessary delays. All these could be saved and the importer could take benefit of SRO 554 in its true spirit. However, this is not possible without proper functioning of EDB, who has to be precise about what plant and machinery is being manufactured locally.

Citing an example, Shabir Ahmed said that EDB considers and classifies deep freezers as ice cream making plants. When investigated and verified from local manufacturers it was found that there were no manufacturers of industrial ice cream machinery.

Similarly, he said when it comes to sewing machines, the entire chapter covering sewing machines 84.52 has been put as locally manufactured which disallows importer to benefit from SRO 554.

He said that there are over hundred different types of sewing machines being used and manufactured for industrial purpose. The more value-addition will require more stitching machines and very different types of stitching machines which may include computerized single needle quilting machines, barudan machines, multi-needle pleat stitching machines and so on.

But unfortunately for EDB, which has put all types of stitching machines on negative list, the industry only needs Salika and Singer which are domestic sewing machines and could not be used for industrial production.