THE AMERICAN BUSINESS

COUNCIL OF PAKISTAN (ABC)

SUGGESTIONS FOR

THE TRADE POLICY 2018/19

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The American Business Council of Pakistan (ABC) was formed in 1984 and is one of the largest

investor groups in Pakistan. The Chamber currently has 66 members that operate in various sectors

i.e. healthcare, financial services, information technology, chemicals & fertilizers, energy, FMCG,

food & beverage, oil & gas and others. Members contribute a sizable amount to the national

exchequer every year as direct and indirect taxes – last year they contributed PKR 135.5 billion.

Member companies employ over 58,242 people directly who support 250,000 dependents and

indirectly employ nearly one million people with agents, distributors, contractors, etc.

ABC’s mission is to protect and promote the interest of U.S. investors in Pakistan; to encourage and

stimulate new investments; to introduce and inculcate best practices and to strive to establish a level

playing field in the country in order to promote the development of commerce between the USA and

Pakistan.

The ABC Industry and Trade Sub-Committee, chaired by Mr. Akram Wali Muhammad, meets

regularly to study major Government policies relating to Trade, Industry (incl. Import & Export), and

the Environment impacting members of the ABC and the American business community at large. The

Subcommittee invites the feedback of all ABC members to identify relevant issues and recommend

possible solutions. After a critical analysis of the feedback received from members, the Industry and

Trade Sub-Committee compiled proposals for 2018-19. This proposal presents amendments and

additions to existing trade policies for improving the investment climate in Pakistan by removing

barriers such as high front load import duties and fuelling up infrastructure development. The paper

also explores environmental issues, quality controls/standards and high utility costs, recommends

policies to encourage exports and lower cost of local industries. Additionally it highlights changes

needed in the import policy especially in procurement systems and power generation to facilitate the

import process. The pharmaceutical sector has been given due importance and various policy

improvements are suggested to resolve the multiple issues plaguing this sector. Lastly and more

broadly, the proposal discusses trade agreements in context of countries such as India, Afghanistan

and USA, stressing the benefits that could be derived.

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EXECUTIVE SUMMARY OF SUGGESTIONS

1. Would like to recommend that 1% extra duty being charged at the time of import of

raw material which was added by Ministry of Finance still continues for the last three

years this needs to be abolished.

2. The turnover tax is the tax which most of the new industries who have barely started

and they don't even break-even for the 1st two years with heavy depreciation charges

and they have been subject to a turnover tax of 1.25%. Also, the current ongoing

existing industries also face the same problem this tax should be abolished in totality.

We had requested the Ministry of Finance to bring it down from 1% to 0.5% instead

of that it has been increased to 1.25%.

3. In order for business in Pakistan to compete a playing level field the rate of income

tax on a corporate should not exceed more than 20% where today the corporate tax is

33%.

Most of the industries manufacturing abroad do not pay such high corporate tax. On

top of this taxes we have 3 other taxes which includes the Social Security, the EOBI

and Education SES Sector. These are additional taxes besides Corporate Income tax.

4. Pakistan Industries charge one of the highest sales tax which tunes between 18 - 21%

to the industry (Manufacturers) Sales tax is a tax which is equivalent to VAT which is

to be paid by the end user and not by the manufacturer, due to the weakness in the

system this burden is added on to the manufacturer. Not only that the manufacturer

has to hire professional staff to collect and report the same period.

5. The tariff rates of Gas and Electricity like in any other country like Indonesia, Sri

Lanka, Bangladesh is much lower on the Industrial use compared to Residential

where in our country the Industrial is higher than the residential.

Need to put our industry in production in order to curtail poverty level and eliminate

ultra poor from our society with good jobs and not to depend on imports which erodes

our hard-earned foreign exchange.

The Government was going to announce in 2012 that Industrial zones which yet the

Government has not announced in cities like Karachi, where one window operation

can take place, just like Sunder Industrial Zone in Lahore Punjab.

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ABC SUGGESTIONS FOR TRADE POLICY 2018-19

INDEX

A. IMPROVING COMPETITIVENESS OF LOCAL INDUSTRY AND ENCOURAGING

INVESTMENT ...................................................................................................................... 5

A1. Improvement in Infrastructure ................................................................................................ 5

A2. Improvement in Processes of Pakistan Standards & Quality Controls Authority...................... 5

A3. Improvement in the Environment ........................................................................................... 6

A4. Power Generation – Duties & Taxes on Co-Generation Equipment......................................... 7

A5. Procurement System to bring Transparency & Efficiency in Government Purchases ............... 7

B. PROPOSALS – SPECIFIC TO PHARMACEUTICAL INDUSTRY .................................. 9

B1. Shelf Life Restrictions: Pharmaceutical Raw Materials and Finished Products ........................ 9

B2. Pricing and delays in Registration ......................................................................................... 10

B3. Amber Glass Bottles: for Pharmaceutical Industry ................................................................ 11

B4. Quota Allocations: of Psychotropic Drugs ............................................................................ 12

B5. Simplification of Approval Process: for Import of Raw Materials of Pharma Industry 12

B6. Tariff Protection ................................................................................................................... 13

B7. Anomalistic Classification of Mefenamic Acid ..................................................................... 13

B8. Duty Rate for Flavors ........................................................................................................... 14

B9. GST on Packing Materials .................................................................................................... 14

B10. Contract Manufacturing ....................................................................................................... 14

B11. Export Duty Drawbacks – Rates and Delayed Realization.................................................... 15

B12. Lower Health Care Costs – Medical Testing / Diagnostics / Lab Reagents ........................... 15

B13. Dressings and Appliances identifiable for Ostomy use ......................................................... 16

B14. Restriction on Import of Locally Manufactured Materials from India 16

C. INSURANCE ....................................................................................................................... 16

C1. Attract FDI in Insurance Sector / Branches of International Insurance Companies ............... 16

C2. Sales Tax on Reinsurance Premium ..................................................................................... 18

C3. Prequalification of Reinsurers by State Reinsurer ................................................................ 18

C4. Need for Holistic approach to Regulations by SBP & SECP -Reinsurance from Regional Countries 19

C5. Remittance related to Claim Settlement / Payment Approval from SBP 20

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D. TOBACCO ........................................................................................................................... 21

D1. Indiscriminate application of Tax Laws ............................................................................... 21

D2. Illicit Trade ......................................................................................................................... 21

D3. Lack of Consolation ............................................................................................................ 21

E. TRADE AGREEMENTS ..................................................................................................... 25

E1. Afghan Transit Trade ........................................................................................................... 25

E2. Trade with India .................................................................................................................. 25

E3. BIT ...................................................................................................................................... 26

E4. Strategic Trade Policy Framework ....................................................................................... 26

F. OTHERS – TRADE & INDUSTRY ISSUES - COURIER ................................................. 27

F1. Ground Handling Custom Duty and Taxes 27

F2. Duties & Taxes (Packing Material) Courier 28

CERAMICS

F3. Extra Duty on Raw Material 28

F4. Turnover Tax 28

F5. Corporate Tax 29

F6. Sales Tax 29

F7. Tariff Rates of Gas and Electricity 29

F8. Regularity Duty 29

F9. Summary 30

INFORMATION TECHNOLOGY

F10. Sales Tax on Export of Call Centre Services 31

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ABC SUGGESTIONS FOR TRADE POLICY 2018-19

A. IMPROVING COMPETITIVENESS OF LOCAL INDUSTRY AND ENCOURAGING

INVESTMENT

A1. IMPROVEMENT IN INFRASTRUCTURE

Issue

Pakistan is a developing economy and looking to fuel

economic growth in the

country. However, over the past few years not a lot of

investment has been made in

uplifting the infrastructure in the country including roads,

national highways, railways and

logistics infrastructure, industry

and trade are severely impacted. Not only does this inhibit trade

and movement of goods within

the country but also increases the cost of doing business

making it difficult for locally

produced goods to compete globally.

Proposal

We recommend that the government should give high

priority to the development of

proper road, rail and transport infrastructure and immediately

form a high level Committee

from public-private sectors directly reporting to the Prime

Minister. Representatives and

Chairmen of Chambers of all

major cities should be given 50% participation. From the

government, Chairmen of

relevant major public sector organizations should participate

along with Secretaries of

relevant Ministries. This Committee should meet with

the Prime Minister on a

quarterly basis to prioritize

major infrastructure development projects and

review their progress.

Benefit

This proposal will greatly speed-up the development work

for all key transport

infrastructure projects, synchronize the critical

development among the

provinces and facilitate industry and trade by reduced cost of

business as well as significantly

enhance global competitiveness

which is essential in maintaining the high growth

rates projected during next 5-10

years.

A2. IMPROVEMENT IN PROCESSES OF PAKISTAN STANDARDS AND QUALITY

CONTROLS AUTHORITY

Issue

The Pakistan Standards &

Quality Controls Authority

(PSQCA) is responsible for developing and enforcing

standards for different product

categories being sold and/or manufactured in Pakistan.

Currently there are mandatory

standards in place for 78 product categories, all of which

are tested by PSQCA. The

Quality Control Center (QCC)

at PSQCA tests selected samples of products from each

batch. The samples are collected

Proposal

PSQCA should have a system

in place whereby importers who

are compliant should be given ‘green channel’ status, whereby

the requirement to have each

and every shipment tested should be abolished. To ensure

consistent conformity the

authorities may conduct testing of random shipments, and in

case of non-compliance the

green channel status of the

respective importer may be revoked. Similarly, a licensing

process also needs to be

Benefit

Simplifying the process would

encourage more importers and

manufacturers to ensure compliance with

the standards. A robust and

feasible regulatory compliance framework would help attract

more investments in the

economy. Prevent delays for businesses and reduction in

additional inventory costs

incurred due to delayed reports.

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either from the port at the time of import or from the plant

directly in case of local

manufacturing. The samples are

then tested as per the metrics defined in the respective

product standards, after which

QCC issues a conformity report. It is after the issuance of the

report that the products can be

sold in the market. It takes 25

working days after continuous follow up for QCC to issue

reports from the time of sample

submission in normal circumstances and in case of

expedited testing (that costs

twice the original fee) it takes them 10 working days. The

testing reports are currently

being issued in an ad-hoc

manner and are often delayed. Since the products cannot be

sold in the market without the

conformity report, these delays are causing additional pileup of

inventory leading to costs and

complexity in the supply chain.

established by the PSQCA whereby importers and

manufacturers should be issued

yearly licenses allowing

freedom to operate, contingent on yearly testing of product

samples v/s testing samples

from batches throughout the fiscal. The license should be

renewed every year and for

every new addition in the

product line. This would ensure compliance by the parties via a

more efficient and streamlined

process.

A3. IMPROVEMENT IN THE ENVIRONMENT

Issue

The Environmental Protection

Agency is implementing prohibition of non-degradable

plastic products for

manufacturers and sellers. The enforcement of these

regulations is being carried out

in a manner where the industry

is not being consulted and there is a lack of guidelines from the

Environmental Protection

Agency for the industry players with regards to compliance with

these regulations. This is

resulting in ad-hoc and inefficient implementation of

regulations and a clear set of

standards need to be defined by

the Environmental Protection Agency for the industry to

follow.

Proposal

1. The Environmental

Protection Agency should form a committee

comprising industry players

as well as environment experts and researchers to

jointly develop standards

which address all important

environment issues currently being faced.

2. The Environmental Protection Agency should

set up a regulatory

framework that streamlines the process for standard

enforcement and

implication and facilitates

the industry in practically implementing these

environmental standards in

Benefit

Streamline the process for

environmental regulatory

compliance for the industry, encouraging the industry

players to comply with

more environmental friendly laws.

Develop standards that are

efficient and more up-to-

date with the best industry

practices.

Helps in attracting more

industry players to invest in

environmental friendly

energy.

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their processes.

A4. POWER GENERATION - DUTIES & TAXES ON CO-GENERATION EQUIPMENT

Issue

Despite much publicized claims

regarding impending improvement in power

generation and distribution by

previous and present regimes, the power situation in the

country is far from improved.

The electric utility companies are ill-equipped to maintain

existing power plants and

handle the rising power demand

in the country.

A way out of this problem is to

promote on site self-generation, by setting up Co-generation

based power plants in industry.

This solution not only

represents better utilization of country's diminishing fuel

reserves but also provides

higher system efficiencies than conventional generator based

power plants (75% vs 30%).

Under the existing rules co-

generation equipment (H.S.

Code 8502.3900) imported

presently has a duty component of 5%.

Proposal

All types of co-generation

equipment should be made duty free.

Benefits

This will encourage industry to

set up their own generation units thereby reduce the load on

public utility companies.

A5. PROCUREMENT SYSTEM TO BRING TRANSPARENCY AND EFFICIENCY IN

GOVERNMENT PURCHASES

Issue

Procurement in Government

departments is carried out through a manual tendering

process. The complete process

requires a long chain of internal

authorizations and scrutiny (at times involving several

departments), several visits by

suppliers to departments, and the generation of reams of

paper-based statements and

Proposal

The above issue can be taken

care of by implementation of e-Procurement best practices that

should be adopted by the

Government of Pakistan. These

best practices will be implemented with the help of an

automated e-procurement

system. Benefits of such a procurement system are

highlighted in the following

Benefits

The severe shortcomings in the

manual tender system have an adverse effect on the reputation

of Government departments.

Delays in the finalization of

suppliers for materials and services for government

projects had crippling impacts

on the completion of projects and delivery of services to the

citizens.

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evaluations. The manual tender system is suffering from the

following deficiencies:

Discrimination and delay in

issue of tender schedules to suppliers: Government

departments control the

issuance of tender documents to the bidders, after verifying their

applications. There exists an

element of subjectivity and

discrimination in this process, in addition to delays in the

preparation of tender schedules.

Cartel formation to suppress competition: Through dubious

means, the participating bidders

gather the list of prospective bidders for a procurement

request. They use this

information to lobby for

formation of syndicates or cartels and bid at higher

quotations.

Tampering of tender files: For the purposes of evaluation, the

bid documents are transported

across the administrative hierarchy, which introduces the

risk of tampering or loss along

the way. The transportation of

bid documents, manually and through surface mail, is also a

time consuming activity.

Delays in finalization of tenders: Red tape, lack of

transparency, and manual

movement of files across the

administrative hierarchy is resulting in inordinate delays in

the finalization of tenders.

These delays are contributing to cost and time overruns for the

projects.

Human interface at every stage: The manual system

exposes the departmental

personnel to the bidders at

every stage of the process. Such repeated contact between

bidders and departmental staff

could lead to subjectivity, favoritism and other undesirable

practices.

Lack of Transparency:

section. The Electronic Government Directorate of

Ministry of IT has already

conducted an exercise though

an independent consulting firm and has come up with such a

procurement framework. All

that is needed now is to implement this system.

Automation of the procurement

transactions reduces human

error, enhances the integrity of

the data, brings in transparency to the Government

procurements and facilitates

standardization of processes.

The entire e-Procurement

process should be designed to

avoid human interface i.e., supplier and buyer interaction

during pre bidding and post

bidding stages.

The automated processes and

work flows will improve internal efficiency within the

departments; shorten tender

cycle times, eliminate

subjectivity in the evaluation of tenders with system based auto

bid evaluations, and reduce

corruption.

Reduction in tender cycle time:

Today the departments take 90-135 days for finalization of high

value tenders. The tender cycle

time can gradually come down

to an average of 42 days over a period of one year and further

reduced to 35 days at the end of

the second year.

Reduction in opportunities for

corrupt practices: The entire e-

Procurement process can be designed to eliminate the human

interface i.e., supplier and

department interaction during pre bid and post bid processes

can be minimized. The

automatic tender evaluation functionality will reduce

subjectivity in tender evaluation

and help to curb opportunities

for corrupt practices to a significant extent and increase

the accountability of

procurement officials. In terms of transparency, a supplier

participating in a tender knows

the list of other participating

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Procurement is considered a sensitive function, with all

related information tightly

controlled and closely guarded

by government departments. This lack of transparency leads

to misinformation and a lack of

trust in the system by the bidders, media and the citizens.

suppliers, the documents furnished by his competitors,

price quotations and the

evaluation result, as soon as a

stage is completed by the departments in the system.

Cost Savings: One way to estimate cost savings is to

compare the percentage

discount of Tendered Contract

Value over the Estimated Contract value for service

contracts awarded before and

after the implementation of the e-Procurement system.

Tenders processed in another country of South Asia through

the e-Procurement platform in

the pilot phase during 2003-04,

the first year of the initiative, yielded a reduction of 16% in

the quotations in comparison to

the previous years when the procurement was manual.

More Competition: The project encourages bidders to

participate in government

tenders. Supplier participation

will increase from an average of 3 per tender in conventional

mode to 4.5 in e-Procurement

mode. The cartels are eliminated and even small and

medium suppliers will be able

to bid.

B. PROPOSALS - SPECIFIC TO PHARMACEUTICAL INDUSTRY

B1. SHELF LIFE RESTRICTIONS: Pharmaceutical Raw Materials and Finished Products

Issue SRO 345(I)/2016 dated April

18,2016 allows import of

Pharmaceutical Raw Materials and Finished Goods on the

condition that these

materials/goods have at least

75% Remaining Shelf Life on arrival at sea/airport in Pakistan.

Sometimes it is very difficult to

Proposal

Industry demands an immediate

review of the Policy in view of the above reasons and set the

timeline for disposition of

hardship cases.

The pharmaceutical shelf life

restriction should be changed to

Benefit This will facilitate the timely

availability of life-saving

pharmaceutical preparations to suffering patients as well as the

smooth operations of

pharmaceutical plants with

uninterrupted supplies of raw materials.

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meet this condition as often manufacturers do not have the

materials/goods available with

them with 75% shelf life and

may have no plans to manufacture fresh batches for

months. This leads to shortages

of materials, delays in production and non-availability

of essential drugs in the market.

more than 50% as is the case in Edible Products.

Note: The shelf life of an end drug/product has no impact due

to the remaining shelf life of the

raw materials.

B2. PRICING AND DELAYS IN REGISTRATION

Issue Registration problems whether

delays in registrations (import,

local or export), unjustifiably low price FIXATION of new

registrations without any logic

has led to decline in overall pharma business. Business and

supply of good quality is

becoming unsustainable, and

newer medicines are not reaching the patients. Delay in

registrations especially of new

molecules is against the public and national interest. It is

depriving the patients to have

access to better treatment.

There has been no across the

board price increase given to the

industry since 2001. DRAP gave some relief to select

products in December 2013 but

has now notified a Drug Pricing Policy (“Policy”) which

contemplates a significant price

reduction. Major points of

concern in the Policy are as follows:

Mandates a roll back of the

15% interim relief given to select products in December

2013.

Mandates a further price cut

of 30% across the board on a large number of products.

Makes provision for relief

based on the Cost Plus

Proposal Industry demands an immediate

review of the Policy in view of

the above reasons and set the timeline for disposition of

hardship cases.

Benefit Price increase, rather than price

decrease will ensure continuity

of business and availability of life saving drugs at all times.

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method which is not transparent and, therefore,

not viable for international

products.

Clear violation of IPR by

allowing generics to register and withdrawing IPR

protections.

Catchall clause, Article 10,

which states that the prices of all imported drugs have

to be calculated on the basis

of local prices. Creates non-

tariff barriers for international investors’

entry into the market.

In addition, the Government

will have a major PR disaster on

its hands as the Policy envisages a price cut for innovative or

leader drugs and a price

increase for locally

manufactured generics. This will see quality products

manufactured by the top drug

companies disappear from the market as they will no longer be

viable.

The industry has challenged the

roll back of the 15% interim

relief in the Sindh High Court

and has obtained a temporary stay order whereby the

operation of the Section 7 of the

Policy, which seeks to roll back the 15%, has been suspended.

Proposal

Industry demands an immediate

review of the Policy in view of the above reasons and set the

timeline for disposition of

hardship cases.

Benefit

Price increase, rather than price

decrease will ensure continuity of business and availability of

life saving drugs at all times.

B3. AMBER GLASS BOTTLES: for Pharmaceutical Industry

Issue

At present, Ghani Glass Limited (GGL) is the only manufacturer

of amber glass bottles for the

entire pharmaceutical industry in Pakistan. This fact is believed

to be an industry threat because

in case of discontinuation of operations of GGL due to any

reason/contingency, no alternate

is readily available to ensure

Proposal

Although currently the CNF cost of imported amber glass

bottles from emerging markets

is higher than the local price, the government has further

levied another 20% custom duty

and 17% sales tax on import of these bottles. In order to give a

breathing space/relief to the

industry, the government should

Benefit

This will ensure business continuity and availability of

drugs to the needy patients.

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business continuity. Resultantly, not only the pharmaceutical

business will be interrupted but

also the patients will suffer due

to non-availability of life saving drugs. PET and HDPE bottles

are not considered as a

substitute for scientific reasons for most of the Active

Pharmaceutical Ingredients

(APIs).

abolish the duty and allow tax free import of these bottles by

the pharmaceutical companies.

From India through SAFTA

Duty 5% Importable from India as Drug Act 1976.

From China through FTA

Duty 11.875%.

B4. QUOTA ALLOCATIONS: of Psychotropic Drugs

Issue

At present, all companies

manufacturing psychotropic drugs are subject to an annual

re-approval process for quota

allocation of materials used in these drugs. As per current

SOP, 75% manufacturing

consumption and 65% sales

consumption against previous quota allocation is required to

apply for quota renewal and

enhancement.

Proposal

It is suggested that the SOP’s

for quota allocation should be revised and Company should be

allowed to apply for quota

renewal and enhancement after consumption of 65% in

manufacturing and 50% in

sales. This gives sufficient time

to both, the DRAP and the company to complete the

process of quota allocation and

purchasing cycle within a reasonable time. Current

practice of 75% consumption in

manufacturing and 65% consumption in sales results in

shortages of lifesavings

medicines due to long

purchasing cycle especially in case of imported materials.

Benefit

Manufacturing capacities can

better be utilized ensuring uninterrupted manufacturing.

Shortages of lifesaving drugs

will be ruled out which will be in the interest of patients.

B5. SIMPLIFICATION OF APPROVAL PROCESS: for Import of Raw Materials of

Pharmaceutical Industry

Issue Some raw materials (e.g.

Acetone) have been placed

under Appendix B of Import Policy Order SRO 345(I)/2016

3 dated April 18, 2016. In order

to import these materials, the

Pharmaceutical Industry first has to get the required quantity

assessed by the DRA and then

obtain a NOC from the Ministry of Narcotics Control for

Proposal Since pharmaceutical is a highly

regulated industry, all additional

approvals should come under a single authority i.e. DRA which

should be one window and a

simpler process.

Benefit Simplify the process of

approval for raw material

imports used in manufacturing of life saving drugs ensuring all

time availability of drugs for

patients need.

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imports.

B6. TARIFF PROTECTION

Issue

Majority of the pharmaceutical

active ingredients (APIs) are

included in Schedule 5 of Custom Tariff which are subject

to custom duty @5% and are

exempt from sales tax. However, to promote basic

manufacturing, the government

has provided tariff protection to

a number of locally manufactured materials e.g.

Ibuprofen, Paracetamol,

Penicillin, Cephalosporins etc. with custom duty up to @ 20%

and GST @17%. This is

resulting in high cost of materials to the pharmaceutical

industry which is already under

severe pressure due to lack of

price increase for many years whereas these local

manufacturers can charge the

price of tariff protected materials at their own

discretion.

Proposal

The government should provide

tariff protection to basic

manufacturers for a limited period of 4 to 5 years after

which the local manufactures

should compete with the international pricing of these

compounds. Moreover, where

there are quality concerns

and/or capacity constraints to meet the total local demand,

tariff protection should be

removed.

Benefit

This will ensure availability of

pharmaceutical raw materials at

competitive price in the overall benefit of the patients.

B7. ANOMALISTIC CLASSIFICATION OF MEFENAMIC ACID

Issue

In most countries Mefenamic

Acid is covered under HS code:

2922.4910. China is also exporting Mefenamic Acid to

Pakistan under the same HS

code. The HS Code 2922.4910 is covered in Pak-China FTA

agreement with 0% customs

duty. However, in Pakistan Mefenamic Acid is not defined

in any HS Code. Customs is

therefore classifying Mefenamic

Acid under HS Code 2922.4990 (Others) with a customs duty of

3%.

Proposal

The government should look

into these anomalies and

classify Mefenamic Acid under HS Code 2922.4910

Benefit

Equitable duty structure

encouraging business and viable

cost of production

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B8. DUTY RATE FOR FLAVORS

Issue

Currently, 40% Regulatory Duty is levied on sugar being

used in Pharmaceutical

Products is causing

considerable increase in cost of manufacturing of life saving

products

Proposal

Regulatory Duty of 40% on sugar used in Pharmaceutical

products should be removed

Benefit

Lower cost of doing business and availability of life saving

products to patients at

affordable prices

B9. GST ON PACKING MATERIALS

Issue

17 % GST on packing

commodities for use in pharmaceutical products is

causing considerable increase in

cost of manufacturing of life

saving drugs/medicines. It is to be noted that price of

medicines/drugs are regulated

by DRAP and sale of medicines are exempted from GST, hence

pharma industry can't pass on

this GST to end consumer. Resultantly, industry is

burdened with increased cost of

manufacturing/doing business.

Proposal

17 % GST on buying of packing

commodities meant for use in pharmaceutical

goods/medicines should be

removed by either notifying

separately or by amending schedule six of the sales tax act-

1990.

Benefit

Lower cost of doing business

attracts investors, encourage cost effective exports and

ensures ready availability of

medicines into the local market.

B10. CONTRACT MANUFACTURING

Issue

A) Outsourcing has become an

important part of supply chain management. As per current

policy Drug Regulatory

Authority of Pakistan (DRAP) does not allow contract

manufacturing of

Narcotic/psychotropic drugs

and DRAP also requires to build a separate/dedicated

facility for

Narcotic/Psychotropic products, which is not viable in certain

Proposal

A) DRAP should change the

contract manufacturing SRO 152/(I)/2014 dated March 05,

2014 and allow companies for

contract manufacturing of Narcotic/Psychotropic

medicines like any other

medicines

B)DRAP to amend the SRO 152/(I)/2014 dated March 05,

2014 by substituting the

condition of five registered products per section …….. Up

Benefit

Patients will receive continuous

supply of essential drugs which are being manufactured under

contract manufacturing.

This will help Pharma Industry to optimize resources and bring

efficiencies in quality medicines

manufacturing operations.

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cases e.g. low volume & low margin products.

B) Current Contract

manufacturing policy limits companies to outsource not

more than 30 registered

products to other companies who have excess manufacturing

capacity.

to thirty products on part of contract giver with thirty

molecules and without

requirement of having

manufacturing license thereby permitting them to enter into

contractual agreement with

other local manufacturer and increase efficiencies within the

overall pharmaceutical industry

B11. EXPORT DUTY DRAWBACK - RATES AND DELAYED REALIZATION

Issue

In order to manufacture drug and medicines through latest

equipment and machineries,

pharmaceutical industry pays

10% sales tax at import stage while importing these

manufacturing equipments

under schedule 8 of the Sales Tax Act 1990. Also, Sales Tax

of 17% is paid on spares and

parts of the said machinery /equipment. As the local

industries, for manufacturing of

machines and parts, have no

substitute for these kind of modern equipment/machineries,

payment of sales tax at import

stage resulted increased cost of doing business.

Proposal

It is proposed that machineries and parts imported for

manufacturing of pharma goods

should be exempted from

payment of sales tax at import stage.

Benefits

It will reduce the cost of

doing business and will enable manufacturers to

make available quality

medicines to the patients

B12. LOWER HEALTH CARE COSTS – MEDICAL TESTING / DIAGNOSTIC / LAB

REAGENTS

Issue

There is a Customs Duty @

20% and Sales Tax @ 17% on

Composite Diagnostic Reagents (H.S. Code No. 3822.0000)

being used in the laboratory for

medical tests. It may please be noted that prior to Financial Bill

1997-98, Customs Duty was

15% and Sales Tax 12.5% on

the same.

Proposal

The Government would strive

to help the common people in

the area of medical coverage. To further this objective, it is

suggested to remove sales tax

however custom duty shall be reduced from 20% to 10%.

This would be exactly in line

with the current tariff applicable

on import of pharmaceutical preparations of Chapter 30.

Also, it is to be noted that

lowering of duty will not affect local industry as these

Benefit

This would help in providing

medical facilities to the

common people at cheaper rates.

17

Composite Diagnostic Reagents are not produced in Pakistan.

B13. DRESSING AND APPLIANCES IDENTIFIABLE FOR OSTOMY USE

Issue

Following Appliances and Dressings for Ostomy use have

a Custom Duty and Sales Tax:

HS No: 3006.91 Customs Duty 20 percent & Sales Tax 17

percent

HS No: 3005.109 Customs

Duty 25 percent & Sales Tax Free

Proposal

For the above HS No Customs Duty and Sales Tax should be

as in the case of Pharmaceutical

preparations under Chapter 30. That is Custom Duty is

suggested to be reduced to 10%

and with no Sales Tax.

Benefit

This would help in providing medical facility to the common

people at cheaper rates. Also, it

is to be noted that lowering of duty will not affect local

industry, as these products are

not produced in Pakistan.

B.14 RESTRICTION ON IMPORT OF LOCALLY MANUFACTURED MATERIALS FROM

INDIA

Issue As per current import policy

(Appendix G), Pharmaceutical

Raw Materials which are being

manufactured locally are restricted to import from India.

Current manufacturers of

Pharmaceutical Materials e.g. Ibuprofen do not have capacity

and required quality, which in

turn force companies to import material from European and

Chinese sources at higher prices

Proposal Raw Material being

manufactured locally should

also be allowed to import from

India

Benefit This will help industry to

import good quality material at

competitive price from India,

which will also benefit to patients to get quality medicines

at affordable prices.

This will also help local

manufacturers to improve

quality and bring efficiencies into their operations

C. INSURANCE

C1. ATTRACT FDI IN INSURANCE SECTOR / BRANCHES OF INTERNATIONAL

INSURANCE COMPANIES

Issue

Currently a Draft Insurance

Bill, issued by SECP on December 28, 2016 is being

reviewed. One of the objectives

in bringing about reforms in Insurance law is to develop the

Insurance Sector in Pakistan.

In this context, a matter of

Proposal

In order to address the situation

and with a view to develop the insurance industry, we

recommend that the Ministry of

Commerce and SECP consider a provision of the Bill to include

branches of foreign insurers as

eligible entities to operate in the

country.

Benefit

The provision will attract

foreign direct investment from International Insurers interested

in opening branches in Pakistan.

It will contribute towards conservation of foreign

exchange in the country, as

increased proportion of

insurance premiums proceeds

18

significance and one that we wish to highlight is regarding

Structure of Insurers as

mandated under Part II 5(a) and

5(b) of the Draft Insurance Bill, 2016.

Currently, there is no provision whereby foreign insurers may

operate as a Branch in the

Country. Therefore to be an

eligible Insurer, it is necessary that any entity wishing to

engage in insurance business be

incorporated locally in Pakistan.

Consequently this has a direct

influence on the Insurer Financial Strength Rating

(IFSR) of the insurers present in

Pakistan, as no entity

incorporated in a particular jurisdiction can be assigned a

rating higher than that of the

Sovereign.

Projects funded by International

Lenders or placed by the State Reinsurer (PRCL) are required

to be reinsured in minimum

S&P ‘A‘ rated security. To meet

this requirement, insurance premium proceeds of most new

projects are exported outside the

country, even when local capacity exists.

The impact of the rating

requirement on inhibiting retention of premium is evident

from the fact that even though

over the last few years there has been inflow of FDI in the

country in developmental

infrastructure and power generation projects financed

through International lenders

(mainly IFC, ADB, OPIC,

World Bank), however this has not proportionately increased

rentention of Insurance

premium proceeds in the country.

These projects have stringent

Such an amendment would

bring internationally well rated

capacity, which would meet

requirements of International lenders and contribute to

increasing premium retention in

the country. Some jurisdictions, such as Turkey (where Chubb

Insurance operates as a branch)

have statutory minimum capital

requirements for branches and is a model which the Ministry

of Commerce and SECP may

wish to review for Pakistan..

will be retained by rated local capacity.

Allowing International insurers

to set up branches in Pakistan will be a step towards growing,

strengthening and developing

the Insurance sector. In the medium to longer term, it may

also allow international insurers

to invest in joint ventures

operations with local insurance companies.

19

terms, and those relating to Insurance / Reinsurance

stipulate that projects financed

under the contract be insured

with an Internationally S&P ‘A’ rated security. Thus all insurers

and reinsurers in Pakistan are

precluded from participating in insurance of these risks.

Notwithstanding the fact that

such terms are ultra vires of the

Insurance law, these contract terms are being honoured and

more than ninety percent of

premium related to such projects is exported and foreign

exchange remitted for

reinsurance placments outside the county.

C2. SALES TAX ON REINSURANCE PREMIUM

Issue

The SRB has imposed a 13%

tax on reinsurance service providers. This has created a

concern in the market as SST is

charged on the insurance premium – to charge SST again

on the facultative reinsurance

transaction acts as double

taxation on virtually the same insurance risk and also adds to

unnecessary administrative

burden.

Proposal

Reinsurance is not an

independent activity that should be subject to tax. Rather it is

only generated by an insurance

transaction which entails sharing the risk of the original

insurer and for the same perils

as covered on the direct policy

of insurance. Thus the transaction does not entail any

“value addition”, reinsurance

only serves to spread the risk, which is the essence of the

concept of insurance and hence

it is recommended that this 13%

tax be removed. It may be pertinent to mention that, on the

basis of the facts

aforementioned, the FBR which had earlier, imposed a similar

charge withdrew it vide Finance

Act 2013.

Benefit

It should be noted that VAT

prevalent in most European Countries including UK,

Ireland, Germany, France,

Finland, Italy etc. exempts reinsurance from VAT. Further

in our region, Sri Lanka, UAE,

Bangladesh as well as other

countries of Asia, levy Sales tax only on premium, while

reinsurance remains exempt.

The removal of this additional levy would bring Pakistan’s

structure in line with other

countries.

C3. PREQUALIFICATION OF REINSURERS BY STATE REINSURER

Issue Tender requirements of

Pakistan Reinsurance Company

Proposal There should be separate

Tender criteria for Pakistan

Benefit Incorporating this proposal will

allow a greater participation

20

Limited (PRCL), the State owned reinsurer, mandates a

minimum S&P ‘A’ rating for

reinsurers participating in

placement of reinsurance programs. Given Pakistan’s

sovereign rating (which is lower

than International S&P’A’) this prequalification requirement in

the tender is discriminatory to

entities registered in Pakistan,

since none of them can be rated higher than the sovereign.

Although PRCL being a State

Reinsurer is subject to special regulations, the intent of the

regulator to promote retention

of premiums is evidenced by SECP circular No 23 of 2015

(applicable to facultative

reinsurance by local insurers)

wherein it has been notified that the current regulatory

framework does not recognize

any requirements for an insurer registered under the Ordinance

to maintain the credit or

financial strength rating by any international or local rating

agency.

registered Insurance companies in accordance with their local

capacity. Rationale: Pakistan

has a number of strong local

insurance companies and a foreign insurance company that

can provide capacity. Tender

requirements need to make a distinction in respect of

Companies registered in

Pakistan -- International rating

requirement should not be applicable to locally registered

entities for the reason that

sovereign ratings have a direct impact on them.

from entities registered in Pakistan and will strengthen the

local market by increasing

premium retention in Pakistan

and reducing foreign exchange outflow.

C4. NEED FOR HOLISTIC APPROACH TO REGULATIONS BY SBP AND SECP -

REINSURANCE FROM REGIONAL COUNTRIES

Issue Pakistan insurance market has

substantial potential to cater to

some of the reinsurance requirements of markets such as

Afghanistan, Bangladesh and

Sri Lanka. Due to business

linkages, many clients based in these countries reach out to

Insurers in Pakistan, however

till date there is no clear framework to provide

reinsurance services and as a

result substantial business has been lost to regional markets

such as UAE, Bahrain

Singapore etc. A major

challenge is the lack of a sound

Proposal There has been interaction on

this matter between SECP and

SBP but an outcome is yet awaited. There is a need for the

two regulators to agree to a

common framework in order to

promote and develop insurance in the country. The issue of

Sales Tax on reinsurance

premium needs to be rationalized in order to make

Pakistan competitive as

presently business opportunities are being lost to regional

markets.

Benefit Broad benefits of the above are

as follows:

- Growth in Insurance sector of Pakistan

- Higher foreign exchange

earnings for Pakistan via export proceeds

- Geographic Risk

Diversification for Pakistan based Insurance

Companies.

- Developing long term

business linkages between

Pakistan and regional

countries

21

interface between SECP and SBP policies – whereas SECP

permits reinsurance of risks

located outside of Pakistan,

SBP has no specific rules governing such transactions and

therefore SBP does not permit

remittance of reinsurance claim proceeds outside of Pakistan.

C5. REMITTANCE RELATED TO CLAIM SETTLEMENT / PAYMENT APPROVAL

FROM SBP

Issue Projects financed by lenders

(both International and local

lenders) contain contract clauses

that require insurance claim proceeds to be deposited into

offshore Trustee accounts in

USD. When settling claim involving

such projects, processing at the

SBP is very slow with unnecessary documentation

being requested from insurers

and in most cases a denial of

permission for claim settlements outside the country.

Consequently the insurers are in

breach of the terms agreed with Lender when financing was

granted for the projects in

Pakistan. Due to inability of

local Insurers to settle as per lender requirements, local and

international re-insurance

brokers, at the behest of lenders, place reinsurance coverage with

offshore Reinsurers,

notwithstanding availability of local re-insurance capacity in

Pakistan. This is in effect a

breach of the Insurance

Ordinance 2000 and SECP Rules 2002 concerning re-

insurance outside Pakistan.

As a result, there is outflow of

foreign currency from Pakistan

market, on account of Insurance premium which could have

been retained within the

Proposal SBP needs to comprehensively

review incorporation of such

clauses in lenders’ agreements

(both local and international lenders) and to take a holistic

approach in terms of other

applicable laws affecting the transactions.

If SBP finds such lender clauses

(requiring payment in USD to offshore bank account)

acceptable, then local insurance

companies should also be

enabled to be in a position to honor the agreements and be at

par with foreign insurers and

reinsurers.

Benefit Reduction in foreign exchange

outflow and greater retention of

premium within the country.

Growth of the Insurance sector of Pakistan via greater premium

retention in Pakistan

22

country, thereby contributing to foreign exchange outflow and

weakening of the local

insurance industry.

D. TOBACCO

D1. INDISCRIMINATE APPLICATION OF TAX LAWS

Issue In Pakistan, the tobacco

manufacturers comprise of two

multinational companies and

approximately 20 registered local cigarette manufacturers.

The brands of local cigarette

manufacturers have a national market share of approximately

40% (source: Nielsen retail

audit 2016) yet, their

contribution to the total tobacco revenue in Pakistan is

approximately 1%

(source: FBR FY 2015 - 2016). For multinational corporations

to remain in Pakistan, they must

be treated equitably with domestic companies, and can't

bear virtually the entire tax

burden. It is critical for the

government to provide a level playing field among all industry

players, seek an equitable tax

administration and ensure this through enforcement of existing

laws across the industry.

Proposal Moderate tax increases with

CPI linkage to ensure fair and

sustainable government revenue

and legal industry volume base. Ensure equal and

nondiscriminatory enforcement

of all tax laws and regulations for both foreign investors and

local companies including the

minimum price law to prevent

local companies to sell their products at a discount. Sustain

an enforcement environment to

ensure that all existing tobacco laws are complied with to

improve industry compliance

and tax base.

Benefit Assured improvement in

business climate for further

investment in tobacco industry

in Pakistan.

D2. ILLICIT TRADE

Issue Illicit trade levels in Pakistan in

the tobacco industry are the 2nd

largest in Asia (source: Asia

Illicit Tobacco Indicator 2015, International Tax and

Investment Center and Oxford

Economic). The revenue loss estimated by the ITIC and OE

study is approximately USD

500 million in Fiscal Year 2015

-2016 and approximately one a

Proposal The government must crack

down on illicit tobacco trade,

both to meet its revenue

shortfall and enhance its credibility, and to demonstrate

its ongoing commitment to

nurturing a business climate that doesn't discriminate between

international and domestic

corporations. Sustained

enforcement through at a

Benefit Constructive action in

coordination with law abiding

industry will lead to more

investment, quality jobs, effective public health efforts

and less financial rewards and

less incentive for criminal activity.

23

half billion US dollars in the last five years.

dedicated task force (Tobacco Squad) to enforce existing laws

in order to stop revenue loss,

and commence immediate

action for tax evasion against all non-compliant local cigarette

manufacturers and smugglers,

including seizure of fraudulently obtained assets,

imposing deterrent penalties,

and closing all non-compliant

cigarette manufacturing facilities. The government, also,

needs to introduce a state

owned simple tax stamp solution to improve the existing

enforcement activities.

D3. IMPROVING PAKISTAN’S TOBACCO EXPORT

Issue

Tobacco exports in Pakistan can

be improved if the Ministry of

Commerce (“MoC”) and Pakistan Tobacco Board

(“PTB”) consider the

eliminating the following restrictions:

I. The tobacco cess

exemption on export tobacco limited to the

same crop year. This

exemption should be for

all exports irrespective of the crop year.

II. The payment of tobacco

cess on un-declared tobacco to Pakistan

Tobacco Board. To

encourage tobacco

exports, PTB should not issue any penalty on

unplanned export

requisitions. III. The payment of tobacco

cess on export of by-

product i.e. stem, fines, fibers, dust, etc.

IV. The export permit

issued by PTB have

limited validity of 3month. These permits

Proposal

Tobacco Cess increases the cost

of tobacco export per kg

making it un-competitive in the region and globally. Removal /

exemption of this levy for the

purpose of export will make Pakistani tobacco competitive

and promote it in the global

market.

Benefit

I. Trade Promotion and

Branding

II. Product Development and Compliance

III. Market Access and

Regional Connectivity

IV. Institutional

Strengthening V. Trade Facilitation

VI. Gender Mainstreaming

VII. Trade in Services

VIII. Investment Linkages

24

should be for at least one year to avoid the

administrative time

required to export. The export permit issued by PTB

do not indicate exemption of

tobacco cess while shipping

tobacco for export. This causes an administrative delay in shipping

the tobacco due to diligence by

PTB and its authorized contractor.

D4. HARMONIZATION OF IMPORT POLICY ON TOBACCO

Issue

Non – harmonization of import policy and local health warning

regulation results in a loop hole

for cigarette smugglers to use. Furthermore, smuggled

cigarettes seized are auctioned

instead of being destroyed

which creates legal cover to smuggle more cigarettes in the

country.

Proposal

Harmonization of import policy on cigarettes to local regulation

of health warning on cigarettes

will reduce smuggling of cigarettes. Furthermore, seized

smuggled cigarettes will be

destroyed instead of being

auctioned

Benefit

The harmonization of import policy to local health warning

regulation will discourage

smuggling as cigarettes without the local health warning

regulation will not be allowed

in the country legally and when

such smuggled cigarettes are seized they will be destroyed

instead of auctioned.

E. TRADE AGREEMENTS

E1. AFGHAN TRANSIT TRADE

ABC would like to acknowledge and appreciate the efforts made for Afghan trade.

Issue

Under Afghan-Pak Trade and Transit Agreement (APTTA),

shipping trucks are allowed to

transit goods within both

nations. To tackle the issue of unauthorized trade, both

countries had agreed to install

tracking devices on transport units and sharing of customs

information It was also agreed

that financial guarantees equal to the amount of import levies

of Pakistan will have to be

deposited by authorized brokers

or customs clearing agents, which will be released after the

goods exit Pakistan. Contrary to

this, Afghan Transit

Proposal

1. Customs procedures and Cross-border rules should

be published for

transparency.

2. Containers coming back from Afghanistan should be

checked by customs.

3. There should be a negative list of items which are not

utilized in Afghanistan; yet

are imported and make their way into Pakistan.

4. Streamlining of border

crossing procedures on

financial guarantee by

banks and anti‐corruption

measures.

5. Establish formal Banking

Benefit

It will help reduce cross-

border smuggling, increase government revenues from

legitimate trade.

The government will

receive substantial taxes as

the domestic production would increase.

This helps in reducing unemployment.

25

Trade (ATT) is causing unlimited damage to the

Pakistan economy as goods

which are imported to be used

in Afghanistan only are freely available in the Pakistan market

without any customs or import

duty.

channel for effective clearance and settlement

system to document trade

flows.

E2. TRADE WITH INDIA

Issue Pakistan and India initially had

made good progress on trade

liberalization however things

came to a halt.

Though there may be benefits

from opening trade, we feel that some clauses and concessions

allowed to India can be

detrimental to certain segments of the local industry such as

agriculture, textile and autos.

The duty structure and

concessions available under SAFTA are already hurting

segments of industry.

Proposal It is requested that the

government undertake

transparent decision making

with respect to trade liberalization, via sharing

specific timelines for trade

liberalization.

All policies should be

developed after considering all dynamics, peculiarities,

preferences including cost

structure and production

capacities and consequent impact of those policies on the

local industry, foreign

investment and trade. Furthermore the government

should consult with all

stakeholders when preparing negative, positive and sensitive

lists.

Benefit If the government ensures

transparency in decision

making, it will engage business

stakeholders in the process more completely and enable

them to create winning

solutions situation for all stakeholders vis-à-vis trade with

India.

The liberalization of bilateral trade between the two countries

would be seen as a good model

by other nations in the region.

This will further help Pakistan to define its trading and identify

ways it can further capitalize its

membership within existing trade blocs such as SARC.

These arrangements will grant

Pakistani products access to a much larger market which in

turn will allow our companies

to huge export opportunities.

E3. BIT

Issue

Pakistan and the United States

launched negotiations for a

Bilateral Investment Treaty (BIT) in 2004.

While substantial progress was

made initial years, the signing of the BIT was delayed.

BITs essentially give

confidence and safety to the

investors that their property and investment will not be

expropriated/ nationalized.

However, the BIT is marred by a lack of knowledge and

Proposal

Both the US and Pakistan Govt.

must ensure that the review

period of the BIT is sufficient and adhered to. They must

engage with the business

community and put stock in their feedback and inputs to be

reflected in the final agreement.

Benefit

A BIT will open the door for a

FTA/PTA between Pakistan and

the US. It promises to enhance trade volume, generate more

employment and spur business

activities. Engagement with the business community and

widespread knowledge of the

benefits of BIT will lead to an

improvement in the US/Pak relationship.

Signing of the BIT would send a clear signal to the U.S. private

26

transparency amongst stakeholders, namely the

business community who will

be directly affected by this

Treaty.

sector and to investors throughout the world of

Pakistan’s commitment to

implementing policies that

support a welcoming investment climate.

E4. STRATEGIC TRADE POLICY FRAMEWORK

Issue The government at the

beginning of the year sets

targets for sectors to achieve

high exports and also allocates funds for infrastructure

development to help and

supplement the export growth. One such initiative was the

Strategic Trade Policy

Framework 2009-12.

Proposal The government should publish

the achievements against the

targets and objectives set for the

year. This will enhance the businessman understanding of

the performance of the

government and may also get advice in the areas where it is

deficit to improve performance

to meet the set goals.

Benefit The performance of the

government in implementing

the trade policy initiatives will

be understood by the business community and will develop

more enhanced trust in the

developing a private public partnership to develop the

exports of the country.

F. OTHERS – TRADE & INDUSTRY ISSUES - COURIER

F1. GROUND HANDLING CUSTOM DUTY AND TAXES

Issue

Customs CGO 08/2009 as the reference list for HS codes for

equipment subject to

exemption is outdated and/or

inaccurate: Gerry's dnata and SAPS have had to pay duty on

ACU that is specialized for

use at Airports only and for which we have historically

obtained duty exemptions.

Gerry's dnata also had to pay duties for X-ray scanning

machines which again have

historically been subject to

exemption. In both instances the OEM HS code is not the

HS Code captured in CGO

08/2009

Proposal

1. Support for recovery of duties already paid

2. Support for a revision to

CGO 08/2009 and a principle

understanding that this is a guiding list only and that

validation for the appropriate

HS code needs to be driven by the OEM HS code 9022.1900

Benefits

Ensure that all GHA's are encouraged to invest in

modernizing their fleets by

bringing in new equipment to

replace EOL (end of life) GSE or to extend their fleet due to

increasing business requirements

by ensuring duty exemptions are made available where they are

due as per law

Issue

Spare parts not subject to

exemption for GSE/ Cargo

equipment:

Proposal

Extend duty exemption to

spare parts for all valid items

listed in CGO 08/2009

Benefits

This will help safeguard the

equipment at the highest

available standard and ensure

27

Regular spares sourcing from OEM's is subject to duties and

increases the maintenance cost

of equipment if we choose to

source original spares

the safest operating standards at the airport by encouraging

GHA's to source original spare

parts from OEM's

Issue

One-time duty exemptions for

Project Phoenix PEB and Material Handling System

imports:

We have had to pay duties for

the PEB and for the customized racking for the

Automated Storage retrieval

system. This is in spite of the fact that both are custom

designed to house material

handling systems for our own commercial operations.

Proposal

1. Recovery of duties already

paid within the project. 2. A systemic approach for

early assessment of project

imports that have a limited

timeline for import clearance given project deadlines

Benefits

Encourages the aviation sector

in particular the ground handling agencies to further

their investment in state of the

art technology projects to

modernize their ground handling & Cargo

infrastructure. Given that there

are early approvals that can be sought - it will discourage stop

gap local solutions as a way of

avoiding project delays due to extended time that may

otherwise be spent on securing

exemption for imports on

arrival

F2. DUTIES & TAXES (PACKING MATERIAL) COURIER

Issue

Issuance of EIF approval by State Bank of Pakistan,

through local bank takes 2-3

weeks’ time for Import of free

of Cost FedEx packing Material. The tedious and

lengthy procedure affects our

business in term of time and demurrage cost.

Proposal

In order to facilitate business and reduce burden of

additional cost, State Bank of

Pakistan to revisit this matter

and implement some sort of system such as “Post Audit”

option instead of “Pre-Audit”

through authorized dealer.

Benefits

It will expedite the procedure of clearance of such free of

cost supplies and gain re-

export benefits.

Issue

We pay duty and taxes on

company supplies that are imported for packing of

shipments exported from

Pakistan.

Proposal

Such materials that are not

locally used and re-exported should be exempted from duty

and Taxes.

Benefits

Courier companies are already

helping to generate more foreign exchange for the

country through exporters.

28

CERAMICS

F3. EXTRA DUTY ON RAW MATERIAL

Issue

1% extra duty being charges at the time of import of raw

material, which increase the

cost of production of local

manufacturing.

Proposed

1% extra duty should be abolished.

Benefit

Enable Local industries to export its product in to

international market which

overcome balance of payment

deficit.

F4. TURNOVER TAX

Issue

The turnover tax is the tax

which most of the new industries who have barely

started and they don’t even

break-even for the 1st two years with heavy depreciation charges

and they have been subject to a

turnover tax of 1.25%. Also,

the current ongoing existing industries also face the same

problem this tax should be

abolished in totality.

Proposed

It is proposed that bring it down

from 1% to 0.5% instead of that it has been increased to 1.25%.

Benefit

Reduce turnover tax rate attract

more investors and sole proprietor to establish company

which ultimately increase the

overall tax revenue.

F5. CORPORATE TAX

Issue

Today the corporate rate is 30%.

Most of the industries

manufacturing abroad do not pay such high corporate tax. On

top of this taxes we have 3 other

taxes which includes the Social Security, the EOBI and

Education cess section. These

are additional taxes besides

Corporate Income Tax.

Proposed

The rate of income tax on a

corporate should not exceed

more than 20%.

Benefit

Shareholder receive higher

return which persuade the

investors to invest in corporate sector and all investor bond to

pay tax on their dividend and

F6. SALES TAX

Issue

Pakistan Industries charge on of the highest sales tax which tune

Proposed

It is proposed that bring it down from 14% and also the extra tax

Benefit

This will help local manufacture to improve quality of their

29

between 17-21% to the industry (Manufactures). Sales tax is a

tax which is equivalent to VAT

which is to be paid by the end

user and not by the manufacturer, due to the

weakness in the system this

burden is added on to the manufacturer. Not only that the

manufacturer has to hire

professional staff to collect and

report the same period.

on some specified goods should be abolished.

product along with reduce in the price of product to compete

with imported product.

F7. TARIFF RATES OF GAS AND ELECTRICITY

Issue

The tariff rates of Gas and

Electricity like in any other

country like Indonesia, Sri Lanka, Bangladesh is much

lower on the Industrial use

compared to Residential where in our country the Industrial is

higher than the residential.

Proposed

It is proposed that remove extra

taxes and duty imposed on Gas

and Electricity bills of industrial sector and tariff rates of Gas

and Electricity should be lower

than residential use.

Benefit

It will reduce the cost of

product and enable manufacture

to quality product at cheap price.

F8. REGULARITY DUTY

Issue

Chinese goods were being dumped in Pakistan. Almost

close to $5 billion were

undocumented imports which was under invoiced. Even

Pakistan government realized

this issue, government itself is

saying that there is discrepancy of at least $ 3 billion in trade

figures of the Pakistan and

China due to massive under invoicing.

Proposed

It is proposed that maintain the regularity duty on tiles or other

luxury goods imported from

China and establish and implement the mechanism to

document all the imports and

prevent the under invoicing of

imported goods.

Benefit

It will increase the government revenue from regularity duty on

imported goods and also from

income tax, sales tax and custom duty on undocumented

imports.

F10. INFORMATION TECHNOLOGY

Issue

SRB-3-4/11/2017 - Sale tax @

3% is charged on export of call

centre services.

Proposed

Export of call center and

backoffice services shall be

exemption/zero rated under

SRB.

Benefit

All export of services are

exempt under Punjab Sales tax

on Services (Adjustment of tax)

Rules, 2012 under rule 12 & 13 & Export of IT Services & ITes

Services are exempted through

30

S.R.O. 590(I)2017 Under Islamabad Capital Territory

(Tax on Services) Ordinance

2001. IT and ITs services shall

also be Exempted in SRB to make it consistent with other

tax authorities.