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  Duty Exemptions for Export Industries

     

Conditional exemption from Customs duty on import of raw materials, components and goods

SRO-555(I)/98 dated 12.6.98 (as amended by SRO-733(I)/99 dt: 12.6.99) allows reduced rate of Customs duty on import of a number of raw materials and components, not manufactured locally, on certain conditions.    The description of manufactured goods and of the raw materials and components allowed under this SRO, at reduced duty rates, are given in Table I to the SRO. The manufactured goods that have export potential, are extracted in the shortened table below, followed by the conditions with reference to Table I:
TABLE-I
S. No:as in SRO-733 Description of goods to be manufactured Description of the raw materials and components PCT Heading or sub-heading Nos. Rate of duty – ad val.
1 2 3 4 5
5 Bus and Truck (lorry) tyres - Stearic acid-Resins(ABS copolymers) 3823. 1100 20%
      3903. 9000 20%
    -Paraffin wax 2712. 2000 20%
    -Petroleum waxes 2712. 9000 20%
6 Engineering goods -Non-alloy (carbon) steel plates 72.08 20%
    -Non-alloy (carbon) steel section, bars and rods 72.14 20%
    -Stainless steel sheets of 4.75mm thickness and above, whether or not annealed. 72.15 20%
    -Alloy steel bars, rods and sections.-Jewelers hand saw blades and glass cutters 72.16 20%
      7219.2200 20%
      72.28  
       82.02  
7 Footwear -PU paints-Release Agents 3208.9000 10%
    -Wax Cream-Shoe Adhesives 3403.1900 10%
    -Hot melt materials-Desmodur RE-Polyol 3405.1000 10%
    -Toe Puff Material 3506.9100 10%
    -Thermoplastic Rubber-Fibre Board-Insole board 3506.9900 10%
    -Combrelle Lining Material 3824.9099 10%
    -Shoe Reinforcement Tapes 3907.2000 10%
    -Rubber Master Batch 3921.9000 10%
    - Finished Leather 4005.1000 10%
      4411.3900 10%
      5603.1300 10%
      5603.1400 10%
      5906.1000 10%
      3204.1700 10%
      Respective 10%
        10%
11 Safety razor blades Precision steel 7212.2000 10%
15 Toilet soap -Palm kernel Oil 1513.2110 25%
    -Coconut oil Respective 25%
    -Cresylic acid 2707.6010 10%
    -Pigments and dry colors 3204.1900 10%
    -Surface active agents Respective 10%
    -Activated bleaching earth Respective 10%
    -Mixture of odoriferous substances 3302.9090 10%
16 Dry battery cells -Natural Manganese dioxide 2530.9020 5%
    -Acetylene black 2803.9010 5%
    -Electrolytic Manganese dioxide 2820.9000 5%
    -Ammonium chloride 2827.1000 5%
    -Zinc Chloride 2827.3600 5%
    -Mercuric chloride 2827.3910 5%
    -Carbon rods 8545.9020 5%
    -Brass caps 8506.9010 5%
    -Zinc slugs 7907.0010 5%
    -Electrolytic paper 4811.9010 5%
17 Printing Ink -Organic pigments 32.04/3205/32.06/32.07/32.11 10%
    -Inorganic pigments 34.04 10%
    -Driers 3908.9000 10%
    -Waxes 3912.2000 10%
    -Resins 39.02 10%
18 Vacuum Flask -Polypropylene 3902.1000 5%
    -ABS resin 3903.3010 5%
    -Silicon 3910.0000 5%
    -Electrolytic Tin plate Respective 5%
22 Shoe polishes -Turpentine oil Respective headings 10%
    -Waxes    
    -Abrasives    
    -Other raw materials    
23 Articles of stationary -Raw materials Respective headings 5%
    - Parts and Components    
24 Television sets(effective upto 30.06.01) -Raw materials Respective 5%
    -Picture tube (color/Black & White) 8540.1100 5%
    -Deflection yoke 8540.1200  
    -Tuner 8540.9100 5%
    -Transformers 8529.9090 5%
    -Front and back cover-Other sub-components, components, modules and sub-assemblies 8504.3100 5%
      8529.9090 5%
      Respective 5%
27 Polyester resins Isopthalic Acid (IPA) 2917.3900 15%
26 Shampoo -Perfume 3302.9090 25%
    -Pearlizar (in bulk) 34.02 25%
    -Sodium lauryl 34.0234.0234.02 25%
    -Ether (in bulk)   25%
    -CAPB (cocoa mido propyle betane) (in bulk)   25%
32 Ball bearing & Tapered roller bearing Raw materials, sub-components and components Respective 5%

The conditions with reference to Table I above are –

(1) The manufacturer has suitable in-house facilities for manufacture.
(2) The manufacturer furnishes to the Chief (Duty Drawback System) in the CBR the list of goods that he is manufacturing alongwith the details of raw materials and components required.  The Chief (DDS), in consultation with the Collector of Customs, will certify the annual capacity of the unit and its total requirements of the raw materials and components.
(3) The manufacturer furnishes a Bank Guarantee, or Indemnity Bond alongwith a post dated cheque, covering the exempted duty, to the effect that he will abide by the conditions of SRO-555/98.
(4) The manufacturer gives an account of the consumption of imported inputs, within one year of the import

Raw Materials Importable at Reduced Duty

Table II under SRO-555/98 lists a number of raw materials and goods which are importable at reduced Customs duty.  Those raw materials /goods which may be used by export industries are extracted in the shortened Table below together with the conditions of import:
TABLE-II
* as in SRO-733/99 S. No:* Description of goods to be manufactured Heading/sub Headings Nos. Rate of dutyad val. Conditions of import
1 2 3 4 5
12 Polyester resins and chips (only filament/ yarn grade polyethylene trephalate P. E. T. 3907.6000 20% If imported by manufacturers of polyester fibre or yarn for the manufacture of polyester fiber or yarn
14 Any substance registered as a drug under the Drugs Act, 1976 (XXXI of 1976), excluding the following:- Respective headings 10%  
  (i)      Filled infusion solution bags imported with or without infusion giving sets Respective 10%  
  (ii)     Scrub (Washing prepara-tion)      
  (iii)    Soft soap      
  (iv)    Adhesive plaster      
  (v)     Surgical tape      
  (vi)    Liquid paraffin      
  (vii)   Savlon (Disinfectant)      
  (viii)      Glorapel       (Shampoo)      
  (ix)    Absorbent cotton wool      
17 Silver 71.06 $2.00 per kg If imported by companies specifically registered and authorized for the purpose by Ministry of Commerce and the import duty is realized in foreign exchange.
5. (i)     Gold 71.08 $1.00 per 11.664 gms If imported by companies specifically registered and authorised for the purpose by Ministry of Commerce and the import duty is realized in foreign exchange.
  (ii)   Gold 71.08 5% If brought by Pakistani passengers, upto one kg, under the personal baggage scheme, with six months stay abroad and duty is realized in foreign exchange.
 28  Live animals  Respective  0%  If imported against bank guarantee for export of packed meat/beef equal to 40% of the gross weight of the live animals and if foreign exchange spent on the import of animals is recovered atleast in full by export of meat only.
29 Whole chilies 09.04 0% If imported by processors-cum-exporters against bank guarantee for re-export after value-addition.
30 Pulses 07.13 0% If imported by processors-cum-exporters against Bank Guarantee for re-export after value-addition
31 Raw sugar 1701.1100 0% If imported against Bank Guarantee for re-export after refining equal to the quantity imported. 
    1701.1200    
56 Polyester 54.02 25%  
  filament yarn      
60 Baby shrimp 0306.1310 0%  
61 Shrimp meals used in shrimp feeding 2309.9000 0%  
62 Diamonds 7102.1000 2%  
    7102.3100    
    7102.3900    
63 Rough 7103.1000 2%  
  gemstones      

Cascaded Import Tariffs on raw materials, sub-components and components for manufacture of machinery and equipment

Under SRO-501(I)/94 dated 9.6.94, on a number of raw materials, sub-components and components, excluding circuit breakers and thermostat as are not manufactured locally, imported for the manufacture  of machinery and agricultural equipment, specified in Table I to SRO-501/94, cascaded import tariffs are applied as in Table III below:
TABLE III
S.No Inputs Rate of Duty
1. Raw materials 10%
2. Sub-components 15%
3. Components 25%

Customs Duty Exemption for import of raw materials, sub-components and components for manufacture of goods meant primarily for export

SRO-499(I)/95 dated 14.6.95, exempts from whole of Customs duty, the import of raw materials, sub-components and components, as are not manufactured locally, and are imported for use in the manufacture of following goods meant primarily for export or supply to industrial units, projects and agencies entitled to import them at concessionary rates:-
(01) Chemicals plants
(02) Fertilizer plants
(03) Heat exchangers
(04) Surgical goods industry
(05) Sports goods industry
(06) Stuffed toy industry
(07) (a) items listed in Table I to SRO-501(I)/94 dated 9.6.94 (see para …..)
(b) items listed in Table I to SRO-504(I)/94 dated 9.6.94 (These are raw materials, sub-components and components for manufacture of electrical and electronic household appliances and are dutiable, under SRO-504/94, at 5% for raw materials and at 10% for sub-components and components but duty-free under SRO-499/95)
(c) items listed in the Table to SRO-505(I)/95 dated 14.6.95 (These are specified materials, components, modules and sub-assemblies, if imported for manufacture of specified electronic equipment and systems approved by government and are dutiable at cascaded tariffs at 10% for materials at 15% for components and at 25% for modules and sub-assemblies, under SRO-505/95, but are duty-free under SRO-499/95)
(d) items listed in SRO-24(I)/96 dated 8.1.96 (These are raw materials, sub-components, and components, if imported for manufacture of components and sub-assemblies of automotive vehicles and automotive battery meant for sale or in-house use, and are dutiable at 0% to 25% under SRO-24/96, but duty-free under SRO-499/95)
(08) Marble processing industry
(09) Steel pipes/tubes industry

Duty reduction on import of raw materials by certain industries

SRO-601(I)/83 dated 11.6.83, allows import of raw materials, excluding artificial plastic resins and mild steel bars and rods, by specified industries, at the reduced Customs tariff of 10%. The industries covered in this duty reduction are those which manufacture the following articles:
(01) Electrical wires, cables and conductors, other than domestic type
(02) Bolts nuts and screws
(03) Tubing for transformers
(04) Wire rope
(05) Welding electrodes
(06) Wire rod
(07) Solder wire
(08) Tubes and pipes of iron and steel of an internal diameter of 200mm and above
(09) Circuit breakers
(10) Compressed or liquefied gas cylinders
(11) Grinding wheels
The import at concessionary duty is subject to the condition that the manufacturer has suitable in-house facilities to manufacture articles listed above and furnishes to the Customs an account of the goods imported with a Bank Guarantee, or Indemnity Bond alongwith post dated cheque, for the Customs duty leviable in excess of 10%.

Customs duty concession on raw materials for manufacture of Pharmaceutical Products, 

SRO-dated 10.07.2000 provides for reduced Customs duty at 10% on the import of a large number of raw materials for manufacture of pharmaceutical products, but not for raw materials and packing materials for repacking of drugs. These raw materials are listed in
Table I in SRO-together with record keeping requirements and procedures. The condition is that the manufacturer is approved by the Director General Health, Government of Pakistan, under the Drugs Act 1976 for manufacture of pharmaceutical products registered as drugs under the Drugs Act 1976.

Customs duty concession on import of raw materials for manufacture of drugs

SRO-dated 10.08.2000, also allows concessionary Customs tariff of 10% on the import of specified raw materials and packing materials, for the manufacture of drugs registered under the Drugs Act 1976. These materials are listed in the Table II in the SRO-       together with the applicable conditions.

Customs duty concession in import of raw materials for basic manufacture of pharmaceutical active ingredients

SRO-   (I)/2000 dated 10.08.2000, further allows concessionary Customs tariff of 10% on the import of raw materials for the basic manufacture of the pharmaceutical active ingredients. The raw materials and the pharmaceutical active ingredients to be manufactured are listed in the Table III in SRO-   /2000, together with requirements of annual capacity survey, certification of annual requirements and other applicable procedures.

Customs duty concession on import of machinery, equipment and tools for manufacture of Jewellery.

SRO-311(I)/89 dated 10.4.89, (App:3.9) allows  concessionary Customs tariff of 20% on import of machinery, equipment and tools, listed in the Table in SRO-311/89 (App:3.9). The condition is that the import is for the manufacture of jewellery by a manufacturer registered with the Export Promotion Bureau as an exporter of jewellery (Also see Section on gems and jewellery in Chapter 3.)

Concessionary duty on import of materials and machinery and equipment for manufacture of costume/artificial jewellery.

SRO-419(I)/94 dated 13.5.94 which allowed a reduced concessionary duty of 20% on import of specified goods required for the manufacture of costume jewellery and artificial jewellery has been rescinded vide SRO-376(I)/2000, dt 17-06-2000 but, “Machinery and Equipment  for manufacture of costume jewellery” has been included in SRO-311(I)/89 dt 10-04-89 (see para 10.10).

Duty Concessions on import of components for manufacture of vehicles, machinery and equipment

SRO-502(I)/94 dated 9.6.94 (App:10.1), allows concessionary rates of duty on the import of components for manufacture of specified tractors, vehicles and agricultural machinery, listed in the Table in SRO-502/94. The conditions for such concessionary duty are :-
(1) The components are in such knocked down condition as approved by Government  for each specified vehicle;
(2) The manufacture has suitable in-house facilities for progressive manufacture and assembly of vehicles, machinery and equipment;
(3) The manufacture has to provide to the Chief (Duty Drawback System), CBR , a list of vehicles, machinery and equipment that he is manufacturing and the annual manufacturing  capacity of the unit alongwith the quantity of components required.
(4) The manufacturer has to chalk out a deletion programme spreading over maximum five years in which he will achieve minimum deletion to the extent of 75% of the C&F value of inputs and the continued availability of duty exemption is contingent upon the achievement of progressive annual deletion as approved by CBR and Ministry of Industries;
(5) At the time of import, the manufacturer furnishes to the Customs an Indemnity Bond and post dated cheque for the amount of Customs duties exempted;
(6) The manufacture has to maintain a record of components and the goods manufactured out of them.  Within one year of the date of import of components, the manufacturer will apply for the discharge of the Indemnity Bond.

10.13 Duty concession on import of machinery for initial installation/BMR of specific industries.

SRO-507(I)/94 dated 9.6.94,  (App:10.2)  allows concessionary import duty of 10% on the import of machinery, not produced locally, for specified industries listed in Tables I and II in SRO-507/94.  These are all export industries, but export is not a condition. The concessionary tariff has the following conditions – 
(1) The import is for the purpose of initial installation, balancing, modernization, replacement and expansion in the case of Table I, and only for BMR in the case of Table II.
(2) At the time of import, the importer furnishes an Indemnity Bond for the Customs Duty exempted.
(3) The Indemnity Bond is discharged on production of installation certificate, within one year of the import.

Customs duty exemption on raw materials and components for manufacture of machinery equipment and vehicles supplied against international tenders

SRO-671(I)/94 dated 3.7.94 allows exemption from Customs duty on raw materials and components,  not manufactured locally, and are imported for manufacture of machinery, equipment, vehicles and intermediary or capital goods to be supplied against  international tenders to projects financed by international loan or aid giving agencies.

The duty exemption is subject to the following conditions:

(1) The importer-cum-manufacturer has suitable in-house facilities for manufacture.
(2) The importer has to declare on the Bill of Entry that the imports are in accordance with SRO-671/94, supported by a certificate of entitlement from the Chief (Duty Drawbacks System).
(3) An Indemnity Bond alongwith post-dated cheque is provided, and it’s charged arranged within one year of import.
Duty concession on import of materials and components imported for manufacture of specified electronic equipments and systems.
SRO-505(I)/95 dated 14.6.95   provides for cascaded tariffs on import of materials, components, modules and sub-assemblies, not manufactured locally, if imported for the manufacture of electronic equipments and systems specified in Table I to SRO-505/95.
The applicable tariffs are 10% for materials, 15% for components and 25% for modules and sub-assemblies.

The duty concessions under SRO-505/95 are subject to the following conditions:-

(1) The components are in approved knocked down condition.
(2) The manufacturer has suitable in-house facilities for manufacturer.
(3) The manufacturer furnishes to the Chief (Duty Drawbacks System) in the CBR to the effect that the imports are for manufacture in accordance with SRO-505/95 and also provides a recommendation from the Ministry of Science and Technology or an authorized officer who, in consultation with the Customs certify the annual capacity of the unit
(4) The manufacturer furnishes to the Customs a Bank Guarantee or an Indemnity Bond alongwith post-dated cheque, equal to the duty exempted.
(5) The manufacturer keeps full record of input or output goods.

Duty concession on import of plant machinery and equipment by specified industries

SRO-369(I)/2000 dated 17.6.2000 (App:10.3) which supersedes SROs 25,26 and 27 all dated 17.1.98, allows the import of plant, machinery and equipment, not manufactured locally for-
(a) Hi-tech specified in Table I of SRO-369, at zero Customs Duty and
(b) Priority industries or agro-based industries specified in Table II of SRO 369/00, at the reduced Customs duty of 10%. The industries covered for this reduced duty concession are engineering/capital goods, chemicals, certain others and agro-based industries like poultry livestock complex, milk processing, fruits vegetables and flowers
Duty exemption on plant and machinery for value-added and export industries
SRO-369(I)/2000 dated 17.6.2000 (App:10.3)allows Customs Duty exemption on import of plant, machinery and equipment by value-added or export industries.
The industries covered are listed in the Table III to SRO-369/00 which includes leather textiles, footwear, surgical and sports goods, carpets, toys seafood, frozen concentrated citrus juices, and mining or value-added mineral processing.  Any other industry not included in the Table III is also entitled to duty-free import of plant and machinery if the other conditions are fulfilled.

The conditions for duty exemptions are –

(a) The industrial unit either exports annually minimum average 50% of its production in the first 10 years or attains a minimum value-addition of 40% of production value as determined by a committee of the Engineering Development Board, National Tariff Commission, Central Board of Revenue, Board of Investment and Ministry of Industries.
(b) The importer has to declare that the import of plant, machinery and equipment is according to the SRO and will be used for manufacturing in the industry.
(c) An Indemnity Bond is provided for the amount of Customs duty exemption. The bond is discharged upon installation of the machinery within one year of import.

Duty exemption for machinery and equipment for subsequent exportation

SRO-552(I)/98 dated 12.6.98 (App:10.5) allows exemption of Customs duty for goods imported into Pakistan with a view to subsequent exportation, subject to specified conditions given in the Table to SRO-552/98. The export-related entries in the aforesaid Table are extracted in a shortened Table reproduced below:
TABLE
Sr. # Description of goods Condition of import
(1) (2) (3)
1. (i) Packing material used or required to be used as external or internal covering of goods, or as holders on which goods are rolled, wound or attached. If such material do not change their original shape or form (packing materials such as straw, paper, paper cones, glass, wool and like materials are excluded).  Packing material if imported filled, it may be re0-exported empty, and if imported empty it may be re-exported filled subject to furnishing a bank guarantee.
  (ii) Machinery and equipment for repair Requests for the import of goods for testing and repair by the organizations operating in Public Sector, shall be payable on goods which are burnt or destroyed during the process of repair provided a certificate is issued by the concerned Ministry  to the effect that burning or destruction of goods has been caused due to reasons beyond human control.
  (iii) Goods imported for display at international or single country exhibition for foreign missions. If imported by or through the Ministry of Commerce or the Ministry  of Foreign Affairs.
  (iv) Machinery imported by the representatives of foreign commercial firms for demonstration purposes. If imported by or through the Ministry of Commerce or the Ministry of Foreign Affairs.
2. Dry fruits If imported from Afghanistan subject to furnishing bank guarantee.  An undertaking shall also be furnished by the exporter that no rebate or drawback of duty has been paid or claimed on or after the time of export of goods.

Duty exemption for machinery and equipment for software development.

SRO-551(I)/98 dated 12.6.98 (App:10.6) allows Customs duty exemption on import of machinery and equipment  and spares for computers and related peripherals as are used for software development, not manufactured locally, for setting up new unit or for BMR of existing units of software development houses or industry, in bond, subject to the following conditions:-
(a) The software house must be registered with the private software export board.
(b) The importer satisfies the Customs that the imports are for the purpose of SRO-551/98.
(c) The certificate of installation is submitted within one year of import.
(d) The machinery and spares imported shall not, within five years of import, be used for any other purpose or for at any other place
(e) A unit which fails to export equal to three times the C&F value of imported computer hardware or software will have to pay the Customs duty exemption

Duty exemption for machinery and spares for new unit/expansion/BMR


SRO-554(I)/98 dated 12.6.98 (App:10.7) allows exemption of Customs duty and Sales Tax on import of machinery and spares, not manufactured locally, for setting up a manufacturing unit or for expansion or BMR of existing units in bond.
The conditions are:
(a)
The export obligation/target for the industries covered are given in the Table to SRO-554/98.
(b) The industrial units have to be in bonded premises where the Customs will have jurisdiction to monitor the production and sale of the output.
(c) The certificate of installation has to be provided within one year of import.
(d) The machinery or spares imported will not be used, within five years of import, for any other purpose or at any other place, failing which the exempted duty and tax is recoverable

List of locally manufactured goods

(1) In several Customs notifications (SROs), raw materials, components, sub-components, assemblies, sub-assemblies, plant machinery and equipment and their spares are allowed to be imported at zero-duty or reduced Customs duty. In all these SROs, the condition is that the items allowed to be imported are “such as are not manufactured/produced locally”. After consultation with the Ministry of Industries, Engineering Development Board, National Tariff Commission and the private sector, the Central Board of Revenue has issued CGO No: 7/1998 dated 24.3.98 (App:10.8) which gives a list of locally manufactured machineries, intermediate goods and raw materials.

(2) The Collector of Customs is authorised to allow release of goods/items in the list of locally manufactured goods/items against Bank Guarantee, for a period of three months if the importer produces a certificate by the renowned local manufacturers of the disputed items or from the Engineering Development Board to the effect that the imported item is not being manufactured locally and the importer produces a clarification from CBR to this effect within the stated period of three months.




 
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