A number of tax exemptions have been offered to facilitate exports and imports

From Shamim Ahmed Rizvi, Islamabad
July 19 - 25, 1999

The new trade policy for 1999-2000, announced by the Commerce Minister Ishaq Dar on Wednesday afternoon, has been widely hailed by the trade and industry for its practical approach offering many new concessions and relief urgently needed by various sectors of the economy. The policy promises to substantially increase Pakistan's foreign exchange earnings by diversifying its exports and for this purpose a number of tax exemptions have been offered to facilitate the exports and imports.

Announcing the new trade policy, the minister said that it has been framed with twin objectives of curtailing the trade deficit and fulfilling the obligation of World Trade Organization. On the export promotion side there will be no restriction on export of cotton while permission is being granted for export of edible oil in small packing with value addition. He also announced a number of adjustments in the import regime to boost industrial production and create new job opportunities. The import target has been fixed at US $ 9.8 billion containing the trade balance at US $ 800 million.

To promote export of engineering, contracting and consultancy services, there will be only one per cent income tax on foreign exchange earnings of these sectors while income of buying houses, and export indenting houses would be treated as export earning. The trade of income tax on export of branded rice in consumer packs of upto five kilograms has been reduced from one to half per cent and refund or adjustment would be allowed to commercial importers on sewing and garment manufacturing machines for industrial use which are to be sold to exporters. The rate of income tax is being reduced from one per cent to 0.5 per cent on export of packed or bottled fish or other foodstuff.

Dar announced that 90 per cent First Year Depreciation Allowance is being given for assessment of income tax for those industries which are engaged in export of packed or bottled foodstuff. The rate of income tax has been brought down from one to half per cent for export of cut and uncut precious and semi-precious stones. The import of cut and uncut precious stones for export production would continue to be allowed subject to the condition that no foreign exchange from the country is used for the purpose. He announced that sales tax refunds and duty drawback would be expedited in the current financial year and export re-finance at the rate of 8 per cent will be provided for the exporters. This facility will be extended to indirect exporter which was earlier provided only to the direct exporters. Those exporters who are also industrialists have the facility that they can import raw material without duty under different temporary import schemes to meet their productive needs.

Announcing customs and other tax concessions for promotion of export, the minister said that export regulatory duty on crushed bones and steamed bones has been reduced to 10 per cent and 5 per cent respectively. The industrial enterprises which are registered as importer would be allowed to import machinery and spare parts of the value of US $ 7,000 per annum through foreign currency demand draft without opening Letter of Credit (L/C) subject to the condition that these are imported by air. The facility of export refinance on cotton thread of less than thirty counts would now be available up to December 31 this year. Earlier, it was allowed till June 30, 1999,

A number of changes in the new export policy have also been affected to increase exports and to boost the domestic productions. These include exemption of import duty upto 30th June next year and of sales tax on new and used machinery relating to housing and construction industries. Similarly, duty-free import of new and used bulldozers and angle-dozers has also been allowed. Under the existing rules, oil and gas companies and refineries could import their needs after securing recommendation of the Petroleum Ministry but the new policy has done away with this requirement. Presently there is no restriction on the lubricants specification but now it was decided that only Automobile Engine Oils-(API)SC/CC and Automotive Gear Oil. (API)GL-4 would be allowed.

The new trade policy also envisages a number of tax incentives for textile and leather industries as under new trade policy, sales tax is allowed to be refunded or adjusted on various items in the production process of leather products provided these industries were producing such goods which are subjected to sales tax and also registered for sales tax. Import of used photocopier has been allowed while import of human blood and related items would require Hepatitis B plus C-free certificate besides Aids-free certificate. The facility of duty draw back upto five per cent would be applicable to exports through courier services, postal services or personal baggage.

It has been decided that in order to increase their re-export, the import of dry fruits for packing and re-export will be on the basis of indemnity bond which will require an additional gredantee from the concerned chamber of commerce Under the sro 818(1)89, the government has allowed import of those items free of excise duty, which are re-exported after further processing.

The Finance Minister also announced incentives, for exporters complying with IS0 9000 and ISO 14000 as well as elimination of child labour. The government would provide assistance of US$ 600,000 to carpet association during the next two years for elimination of child labour while Child Labour Foundation would be provided Rs 20 million for rehabilitation of children.

In order to improve quality of fruit for export, there is proposal to set up research and development centres for citrus fruit in Sargodha, apple in Quetta, dates in Turbat and mangoes in Multan. One window facility for export of perishable fruit and vegetable would be provided at Karachi and Multan airports.

The Finance Minister said that services of a professional organization have been acquired to feed profile of 9,500 exporters on Internet to promote electronic commerce and feasibility of a number of projects is being prepared in collaboration with Export Promotion Bureau and PIDC to provide infrastructure facilities for promotion of exports. The government would also construct 5,000 kilometers farm-to-market roads and connect them with national highways.

The Overseas Pakistanis will be allowed to send goods upto US$ 10,000 from their own foreign exchange without opening any LCs by the recipients. Other measures announced by the Minister include decision to establish special trade courts in Karachi and Lahore to settle the trade disputes and handing over a management of Pakistan Central Cotton Committee to private sector as well as reorganization of Pakistan Oil Seed Development Board.

The business class in the twin city Rawalpindi/Islamabad welcomed Trade Policy 1999-2000 and hoped it would help increase export and reduce trade deficit during the current fiscal year. Talking to Page, President Rawalpindi Chamber of Commerce and Industry (RCCI), Ashfaq Mehmood said that reasonable target had been set for exports and imports and there were few steps which would help achieve these targets.

The most important thing, he said, was changing of trade courts into speedy courts. Cases of wrong and unhealthy activities in trading were consuming year after year but now these speedy courts would check such practices and maintain quality business in the country.

President Islamabad Chamber of Commerce and Industry (ICCI) Basir Daud said that the trade policy was a balanced one and tended to increase exports and reduce trade deficit. He said that manufacturing costs in the country were now coming down mainly due to reduction in duties and electricity tariff which would increase competitiveness for Pakistani exports and more and more trading would take place.