ISLAMABAD: The government is likely to minimise the impact of free trade agreements by withdrawing duty exemptions on the import of certain items in the next fiscal year.
The net revenue impact of preferential trade deals in 2016-17 is estimated to be Rs41 billion.
These trade deals were concluded probably in haste as they benefit the trade partners in most cases. Trade data also confirms that these agreements have led to negligible gains in exports while increasing imports notably.
For example, Pakistan lost over Rs6 billion because of the duty-free import of 24.3 million mobile sets mostly from China in 2016-17.
Official data shows the Federal Board of Revenue (FBR) collected only Rs428m on the import of 1.7m mobile sets, which were sourced from non-FTA countries. The flat rate of duty was Rs250 per mobile set.
To bring it under the tax net, the FBR has imposed a regulatory duty at the rate of Rs250 per mobile set that will now be applicable to imports from all countries even if they are covered by trade deals.
Earlier, almost all types of telecom equipment were cleared at zero per cent duty under the FTA. Now a regulatory duty of 9pc has been imposed on telecom equipment.
Despite an adverse impact on the economy, the Ministry of Commerce intends to sign FTAs with Turkey and Thailand.
“We have identified several products that are covered under preferential trade agreements and hurt the local industry,” an official source said.
The regulatory duty regime is supposed to serve the dual purpose: mobilise revenue and protect local manufacturers.
