TAXES AND JOBS UPDATES

EXPORT OF BRASS: HIKE IN BRASS PRICES DUE TO NON IMPOSITION OF RD

The non-imposition of the regulatory duty (RD) on the export of brass by the Federal Board of Revenue (FBR) has resulted in sudden increase in its prices from Rs 425 to Rs 550 per kg due to its acute shortage in local markets of Punjab.

Atif Iqbal, Executive Director Organization for Advancement and Safeguard Industrial Sector (OASIS), told that the prices of the brass has witnessed a major increase from Rs 425 to Rs 550 per kg due to its severe shortage in domestic market. The situation has been brought into the notice of FBR as well as Competition Commission of Pakistan (CCP) for immediate action. However, it is unclear why the FBR Customs Budget Wing is reluctant to take action on the said issue.

The OASIS has requested Rukhsana Yasmin, Chairperson FBR/Secretary Revenue Division, to call a report from FBR Customs Budget or FBR Member Customs to ascertain reasons behind non-imposition of the RD on the export of brass. Despite the fact that the same was announced in budget (2018-19), the FBR has deliberately ignored the imposition of RD on the export of brass under specific Pakistan Customs Tariff (PCT) heading.

The representatives of the OASIS said that the FBR has 'erroneously' imposed 25 percent RD on export of waste and scrap of copper only (Pakistan Customs Tariff heading 7404.0090) which is an anomaly. This duty is absolutely insufficient and does not have any impact on export of brass from Pakistan leaving this industry at the mercy of exporters' mafia again. Resultantly, the prices of brass scrap have again started to shoot up and shortage of brass has occurred in the local market due to re-starting of export of brass from Pakistan.

Atif Iqbal representing the local industries further said that the situation has led to closure of sanitary fittings manufacturing units of Gujranwala. Another factor is rupee devaluation against US dollar rendering raw materials cheaper for the international players from Pakistan in the international market.

The manufacturing of certain finished products using raw material/input of brass has come to a halt due to extreme shortage of this raw material in Punjab, he maintained.

The executive director OASIS further said that the manufacturing process has almost been stopped in cities of Punjab due to non-availability of brass for the local manufacturers. The Federal Board of Revenue (FBR) has refused to impose regulatory duty on the export of brass due to unknown reasons.

This is a major anomaly of partial imposition of 25 percent regulatory duty on export of only waste and scrap of copper (excluding brass), resulting in severe shortage of brass for wide range of sectors/industries. This shortage of brass has resulted in closure of local sectors, restricted competition, inevitably hurting the interest of consumers and economy at large, falling the issue within the purview of the CCP.

"In the absence of regulatory duty on brass, it is being exported freely, while its shortage has resulted in the closure of several local industries, inevitably hurting the interest of consumers and economy at large," said Atif Iqbal said.

Atif Iqbal informed that the OASIS has been forced to approach anti-competitive watchdog for redressal of the issue. He alleged that the FBR is protecting the interest of some exporters instead of facilitating dozens of local industries. As the FBR's measure is resulting in shortage of brass and closure of local sectors, the CCP must act promptly to ascertain the facts and issue policy note/opinion to the FBR for imposing RD on export of brass.

It is a fact that non-imposition of the RD on the export of brass has served as a statutory protection for the interest of a few exporters at the cost of reduced incentive for many local sectors.

In order to ensure free and healthy competition in the market and to create a level playing field for all the market players, it is essential that all undertakings are treated at par. Therefore, it should be recommended that regulatory duty on export of brass be imposed to check closure of domestic markets using brass.

In a presentation to the prime minister, Finance Ministry, Commerce Ministry and FBR, Atif Iqbal proposed to either impose a complete ban on export of brass and copper as raw material i.e. without value addition or impose heavy regulatory duty on such exports to help the local industry survive by being competitive nationally and internationally. The resultant exports of finished goods also promise millions of dollars in foreign exchange easing out the balance of trade, Atif Iqbal added.

Muhammad Azeem Danial, legal advisor OASIS, stated that despite assurance of Ministry of Finance and Commerce Ministry, the FBR failed to impose 25 percent regulatory duty on export of waste and scrap of copper and brass, resulting in severe shortage of brass in domestic market.

The Finance Act 2018 was required to amend Customs Act 1969 to impose total ban or slap heavy regulatory duty on the export of waste and scrap of brass/copper to avoid shortage of brass for local manufacturers of sanitary fittings, hardware/kitchenware, copper wire manufacturers, surgical equipment manufacturers and others in Punjab, Azeem Danial added.

All Pakistan Brass Water Fittings Manufacturers Association has strongly apprehended that prime minister should save this industry from complete shutdown and issue necessary instructions to FBR to consider the case in anomaly committee and make necessary rectification by inserting all the above sub-heads in the SRO 645(I)/2018 so that complete protection may be ensured to the Brass Water Fittings Manufacturing Industry.

The APBWFMA has repeatedly made appeals to impose ban on export of waste and scrap of copper and brass exportable under various sub-heads of Chapter 74. "The Ministry of Commerce as well as Ministry of Finance appreciated our demand and graciously decided to impose regulatory duty to the tune of 25% on export of waste and scrap of copper and brass. But unfortunately while deciding upon PCTs in the current Budget 2018-19 the FBR only included PCT 7404.0090 in SRO 645(I)/2018 which stands for "waste and scrap of copper" only whereas main concern and basic demand was for imposition of duty on export of "brass" which is exported under different PCTs including Copper Waste and Scrap - Brass (7404.0010); Copper Waste and Scrap - Others (7404.0090); Copper-zinc base alloys (Brass) PTC heading 7403.2100 and Copper bars, rods and profiles - of copper-zinc base alloys (brass) PCT heading PCT heading 7407.2100."

Since brass is an alloy of copper and exported in different shapes under various sub-heads of chapter 74 therefore, proposal was made for imposition of heavy duty or ban on export of both "copper and brass" exportable under chapter 74.

It was anticipated that FBR will include all sub-heads under which scrap of copper and brass is exported keeping in view all shapes in which this item may be exported with a view to provide complete protection to our industry.

The OASIS has also taken up the matter with the Federal Board of Revenue (FBR) to review RD regime on export of brass through Finance Bill 2018.

The executive director OASIS explained that it is really a matter of deep concern that the local manufacturers of sanitary fittings in Punjab are facing severe problems due to shortage of brass and some units are likely to close down their factories due to this very threat. Most of them are working in the category of cottage industry whose bread and butter are solely dependent on their day-to-day production. The local manufacturers have approached OASIS and requested to raise collective voice to reach the ears of concerned quarters. Since the primary objective of OASIS is to work for the protection of domestic industry and the employment associated therewith; therefore, it is making this very request on behalf of All Pakistan Brass Water Fitting Manufacturers Association (APBWFMA) as a gesture of unity and commitment, he said.

The local manufacturers of sanitary fittings consume major quantity of brass/copper scrap (scrap) as their primary raw material and produce contemporary sanitary fitting products after making substantial value addition. There are tens of thousands of households associated with this industry directly and indirectly. This industry is also making import substitution of millions of US dollars every year and has every potential to export sanitary fitting products to rest of the world. The manpower engaged in this industry ranges from small individual entrepreneurs (cottage industry) to medium-sized and organized large-scale industry, the executive director OASIS added.

Regards,

Nadeem Butt - (FCA), FPFA, B.com

Chartered Accountant

Chairman LTBA - Tax Academy (2018-19 & 2017-18)

Member Publications Committee of ICAP (2017-18)

Member Practice Support Committee of NRC of ICAP (2017-18)

Member Finance,Taxation & Sales Tax Committee of LCCI (2017-18)

Vice Chairman LTBA - Tax Academy (2016-17)

Member (Special Invitees) Taxation Committee of LCCI (2012-13)

Audit and Tax adviser of all Pakistan Cottage Industry & Small Traders Association 

Principal of Institute of Taxation and Finance

20+ Years experience as Professional Author and Teacher of Taxation

Financial Adviser of DAWAT-E-ISLAMI

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