ANNOUNCED AS TEMPORARYNo
Tax or social insurance relief
On 21 October 2013, Pakistan's Ministry of Finance and Revenue issued notifications SRO 939(I)/2013 and SRO 940(I)/2013, which reduce the custom duties leviable on the imports of sub-components and components, imported in any kit form by a new entrant assembler or manufacturer, for assembly or manufacturing of motorcycles classified under HS 8711.
The earlier policy for new entrant in manufacturing and assembling was setup in 2006, and the current amendments are as follows -
1) Lower customs duty at the rate of 10%, instead of 15%, is availble for new entrants for five years. This will be phased out each year as manufacturing of components are localised
2) Additional customs duty leviable at the rate of 32.5% shall not be charged for a period of five years. The benefit is also available only when the required conditons for localization are satisfied each year
This measure is likely to have mixed effects on foreign commercial interests. New foreign investors will benefit but existing foreign manufacturers and assemblers in Pakistan will face additional competition. The linking of the tariff reduction to local production targets adds another distortion. Foreign exporters of finished motorcycles are likely to be harmed as well. Hence it is reported here as an Amber measure.
The GTA includes state guarantees and other financial incentives that are likely to affect the restructuring and performance of firms facing international competition, whether from imports, in export markets, and from foreign subsidiaries.
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