ISLAMABAD, May 27: The tax authorities are considering a proposal to scale down customs duty to five per cent across the board on all machinery and do away with all stringent conditions required for getting duty exemption on import of machinery in the budget for 2004-05.

Well-placed sources told Dawn that a proposal was also under consideration to abolish 15 per cent GST and six per cent withholding tax on import of machinery to encourage investment in the country.

However, the sources said the IMF was opposing the government's move to completely abolish the GST and withholding tax on machinery, which the Fund believed would result in shortfall in revenue collection.

"The incentives will only be available on import of those machinery which were not manufactured locally, said the sources and added that in case the proposals were considered, it would be announced in the budget.

Elaborating further, the sources said that a budget committee was already working on the proposals to actually work out the revenue impact of all these concessions on the import of machinery.

According to the statistics, customs duty collected on import of mechanical machinery under chapter 84 stood at Rs4.7 billion during the July-April period of the financial year 2003-04 against Rs3.3 billion collected on the import of same machinery during the same period last year, showing an increase of 42.5 per cent.

And the total revenue collected on import of electrical machinery under chapter 85 during the period under review stood at Rs2.9 billion against Rs2.3 billion over the same period last year, indicating an increase of 24.9 per cent.

The average effective customs rate on import of mechanical machinery during the year 2003-04 stood at 9.6 per cent. In case the government reduced the effective rate of mechanical machinery by one per cent, that will mean a net loss of Rs400 million for the national kitty.