Federal government is likely to reduce general tariff slabs from eight to seven in the budget 2012-13, aimed at revising duty downward in light of recommendations of tariff reforms committee headed by Deputy Chairman Planning Commission, Dr Nadeem-ul-Haq, well informed sources in FBR told Business Recorder.

Giving the background, the sources said, during the meeting of the tariff reforms committee on July 6, 2011 under the chairmanship of Deputy Chairman Planning Commission, four sub-committees were constituted to work on different recommendations made in the consultant’s report on tariff rationalisation.

The FBR has accordingly begun work on proposals to lower the maximum tariff and to reduce the number of tariff slabs over a period of three years. Tariff reforms committee/ Planning Division asked FBR to develop a framework to bring down general tariff eventually to 10 per cent.

The present tariff structure has 6808 tariff lines (at HS-8 level). The existing tariff structure is based on a cascading principle, i.e., a lower duty on raw materials and higher on finished products, with certain exceptions for protection of local industry.

All the rates above 25 per cent are special rates, including auto sector imports. Other special rates are for alcoholic beverages, edible oils, gold, silver, mobile phones and exposed cinematographic films. There are nine special tariff slabs mainly for auto sector, alcoholic beverages and edible oils.

Consistent tariff rationalisation process throughout the 1990s and 2000s had bought down the peak tariff rates from 250 per cent to 90 per cent slabs considerably reducing the number of tariff slabs.

The general maximum tariff rate was reduced to 25 per cent in 2002-03 which continued till 2007-08. However, in 2008, in order to control fast depleting forex reserves on account of increase in international commodity prices, tariff rate on approximately 337 items (tariff lines) was increased from 20 per cent to 25 per cent to 30 per cent and 35 per cent which not only increased Pakistan’s general tariff rate to 35 per cent but also increased the general number of slabs from 6 to 8.

In pursuance of decision of the tariff reforms committee of Planning Commission that general tariff on imports would be brought down to 10 per cent within next three years

FBR has proposed that maximum general tariff should be brought downwards gradually from 35 per cent in 2011-12 to 25 per cent in 2012-13 to 15 per cent in 2013-14 and 10 per cent in 2014-15.

The FBR argues that some of the finished goods should also be brought down from 25 per cent to 20 per cent. Plant and machinery not locally manufactured should remain at 5 percent. Plant, machinery locally manufactured, presently at 25 per cent should be reduced to 20 per cent.  Consumable raw material should be charged at 2 per cent from zero per cent.

According to sources,   number of general tariff slabs should be slashed from eight to seven percent i.e. 0 percent, 2 per cent, 5 percent, 10, per cent, 15 percent, 20 per cent and 25 percent.

MUSHTAQ GHUMMAN