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Finance Ministry takes tax related measures to protect local industry

Finance Ministry takes tax related measures to protect local industry

ISLAMABAD: In a bid to protect the local manufacturing sector, the Finance Ministry has taken a number of tax related measures along with incentives for the local industry.

In this regard, customs tariff cascading is done in such a manner that statutory rate of customs duty is the highest on import of products which are manufactured locally. Similarly, regulatory duty has also been levied on import of many items which are locally manufactured.

“The concessionary notifications/schemes for import include condition that such items are not locally manufactured. The list of locally manufactured items is notified through a Customs General Order issued by the Federal Board of Revenue” said a well-placed source at Federal Board of Revenue (FBR) while talking to Customs Today.

There are various concessions available local manufacturers belonging to different sectors such as pharmaceutical manufacturers; textile industry, solar sector, aviation, mining industry, agro-based industries etc.

Many concessions / exemptions are also extended to local industry involved in exports such as Duty Drawback Scheme, Duty & Tax Remission for Export (DTRE) Scheme, manufacturing bond, export processing zones, temporary importation scheme, small & medium Enterprises and Export Oriented Units (EOU) etc. Refunds / input adjustment and duty drawback schemes are also available for manufacturers.

The source said that exemption from sales tax to medical equipment, machinery and items for mine construction, for Thar Coal Field, for power generation projects, power transmission projects, for marble, granite and gems stones extraction and processing industries, to items for promotion of renewable sources of energy is available under Table-3 of the Sixth Schedule to the Sales Tax Act, 1990.

However, to safeguard the interests of local manufacturing sectors, the said exemption is subject to the conditions that imported machinery/goods are not manufactured locally.

Similarly, the source said that exemption from sales tax had been provided under Table-1 of the Sixth Schedule to the Sales Tax Act, 1990 and 3rd Schedule to the Federal Excise Act, 2005 to materials and equipment for construction and operation of Gwadar Port and Gwadar Free Zone. To incentivize local manufacturing sector this exemption is equally available to materials and equipment produced and supplied for these projects by local manufacturing sector.

It may be noted that wherever exemption from sales tax and federal excise duty is proposed to be provided, the provision of exemption is almost invariably made subject to the condition that imported items/ goods are not manufactured locally.

The source further added that interest of local manufacturing sector, textile and leather in particular had been safeguarded by subjecting ready to use finished articles of textile and leather to sales tax @ 17% whereas similar articles of local manufacturing sector were subject to reduced sales tax rate of 5% later enhanced to 6% vide Finance Act, 2017. However, on objections of European Union and to ensure favorable decision on GSP+ status of Pakistan identical rate of sales tax has been fixed on ready to use finished articles of textile and leather.