ISLAMABAD: With the aim to genera more revenue, the federal government is likely to withdraw zero-rated status of cotton in the last quarter (April-June) of fiscal year 2016-17.
Under FBR’s SRO No 38(I)/2017 and SRO No 39(I)/2017, the FBR had exempted customs duty and additional customs duty on the import of 13 items including cotton, artificial staple fibre and other types of cotton during January 17, 2016 and June 30, 2018. Through SRO No 38(I)/2017, the Federal Board of Revenue (FBR) has exempted 13 items from payment of additional customs duty on the import of 13 items including imports of goods classifiable under specified PCT codes.
Through an SRO 36(1)/2017, zero per cent sales tax would be applicable on machinery, not manufactured locally, if imported by textile industrial units registered with Ministry of Textile Industry, as specified in Part-IV of the Fifth Schedule to the Customs Act, 1969, subject to same conditions as specified therein.
The Ministry of Finance had estimated financial impact of withdrawal of duty and sales tax on cotton imports at Rs 5 billion but the ECC later increased it to Rs 10 billion. The official sources revealed that Finance Division had moved a summary to the Economic Co-ordination Committee (ECC) of the Cabinet to withdraw the zero-rating facility and restore 4 per cent customs duty and 5 per cent sales tax on import of cotton. But the Ministry of Textile Industry and Commerce rejected the proposal while saying it would hurt the sector.
However, Finance Minister Ishaq Dar has constituted a committee comprising three secretaries, including secretary textile, secretary commerce and secretary national food and security, and Special Assistant to Prime Minister Miftah Ismail who will head the committee. The committee would further discuss the issue and present its recommendations to the ECC.
