Daily Times

KARACHI: The Sindh High Court (SHC) Wednesday while giving its final judgment with regards to the recent increase in Regulatory Duties (RD) by the federal government has declared the Statutory Regulatory Order (SRO) as null and void.

The Court declared this SRO ultra vires or no legal effect and the respondents or any authority or officer thereof are restrained from demanding any duty in terms of SRO 1035 or from enforcing the same in any manner whatsoever, whether by way of detaining or refusing release of imported goods or otherwise.

The Court further ordered the Federal Bureau of Revenue (FBR) to give back the security deposit immediately given by the importers under interim orders. The court said that any amounts paid by the importers (petitioners) in terms of RD must be refunded in full. “Such refund may be made by way of direct repayment or adjustment (against any tax or duty) and in one lump sum or in installments.

However, the entire amount that is refundable must in each case be settled in full not later than 31.10.2018. 31. This judgment is suspended for 30 days in order to enable any aggrieved person/party so desirous to avail the remedy of appeal. During this period the interim order dated 26.10.2017 made in CP D-7159/2017 (and also as made applicable in other petitions) shall continue to remain operative.

The Government had imposed RD on import of various items through an SRO in a bid to curtail widening trade and current account deficits. The government had earlier expected to raise Rs 20-25 billion in revenues from the said measures while expected curtailment of imports was also minimal since RD were never imposed on major import heads.

“We reckon that the brunt would be faced only by electronic manufacturers, on the other hand, automobile assemblers and other automobile parts manufacturers have neutral impact as regulatory duty in the nullified SRO was imposed on only new imported cars which constitute insignificant proportion in total cars imports” said an analyst at Elixir Securities.

The SHC’s decision does not have any material impact on the steel sector as RD was remained unchanged in the nullified SRO.

The analyst believes that the annulment of duties will have insignificant effect on estimated fiscal deficit (5.0%+ of GDP) and Current Account Deficit (4.4% of GDP).

Given RD was imposed on import of a number of food items thus removal of duties may result in lower food inflation and headline inflation readings, he added.

The FBR had issued a revised levy of RD S.R.O. 1035(I)/2017 on 17th of October, 2017 adding some 356 new items in the list whereby RD would be imposed on the said items between 2 percent to 80 percent effective October 16, 2017.

Pakistan Steel Millers Association (PSMA), Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM), Chairman Pakistan Chemicals & Dyes Merchants Association (PCDMA) and Pakistan Chemical Manufacturers Association (PCMA) had raised concerns over the imposition of additional RD.

Published in Daily Times, February 8^th 2018.