Every government action needs a careful attention before its implementation as a single order has multi-dimensional effects on trade and industry.
The Ministry of Finance has recently imposed regulatory duty on 131 items with an objective to discourage import of luxury goods. But no country in the world, even the United States, is able to effectively curb smuggling. As a matter of fact, the duties and taxes should have to be rationalised to curb smuggling and even discourage the emergence of a parallel economy in the wake of tough government rules and regulations. The cost to discourage smuggling is more than the revenuecollected through imposing taxes and duties.
The government has imposed 5 to 15 percent regulatory duty on import of a number of items used as raw material by the local manufacturers. The step is taken to curb smuggling but it has increased the cost of finished products in the country.In the process, some items,which are imported by the industry for value-addition, have also been subjected to regulatory duty. This is the age of industrial competition and the Pakistani industry is already passing through tough time due to wholesale import of substandard goods from China. The additional regulatory duty on several items hasincreased the cost of production to the level where the final product has lost its worth to compete in thecountry and international market. Though the duty is imposed on the luxury items, but it is affecting the local industry because some of the items fall in the category of raw material.The local industry is already facing load shedding and the entrepreneurs are under pressure. In this situation, a plausible strategy is the need of the hour. According to the SRO 131(I)/2015, the raw material with Pakistan Customs Tariff Code 7602.0090, 7204.5000, 7204.4990, 7204.4100 and 7204.3000 are subjected to regulatory duty.
About 10 years ago,aluminum alloy ingots were being directly imported to meet the domestic demand of industries associated with manufacturing of automobile and fans industry. However, import of ingots was stopped when manufacturing technology for aluminum alloy ingots was introduced.Nowthemanufacturing of ingots has become uncompetitive due to imposition of five percent regulatory duty as imported aluminum alloy ingots are cheaper than the local.
It is the irony that regulatory duty has been imposed on imports of raw material,but free import of finished products has been allowed. It is hoped that the authorities concerned will look into the matter and will come up with a best solution in the best interest of the country.
