KARACHI: Violation of customs rules have touched new heights as Iranian tiles are being cleared by Customs Department staff on wrong Harmonised System (HS) code and incredibly low value, said local tile makers.
Local tiles manufacturers said that as much as Rs 2 billion worth of Iranian tiles have been dumped in the local market with customs intelligence staff “sleeping over the matter”.
According to the customs documents, the biggest quantity of tiles is being imported and smuggled into Pakistan through Iran’s border at the rate of just under Rs 10 per square metre. But the item is being shown under HS Code 2713-2000, which is bitumen, tiles manufacturers said.
The massive smuggling in garb of import documents has worried local manufacturers of tiles. Some of them have been forced to reduce production or even shut down their manufacturing units. “The heavy influx of under-invoiced tiles and smuggled tiles from this neighbouring country has jeopardised the local industry compelling it to reduce production and in some cases to shut down units,” said CEO of Karam Ceramics Irshad A Kassim.
Kassim further said that this large influx of tiles is also causing loss of substantive and precious foreign exchange to the national exchequer in addition to huge losses in revenue collection to the government as some of the importers of these tiles are paying all combined taxes (duty, sales tax, income tax) as low as Rs 10 per square metres only, while a manufacturer of locally produced ceramic tiles pays just the sales tax at an average of Rs 100 per square metre.
Stakeholders said that these under-invoiced Iranian tiles are abundantly available in the local markets all over the country and are being sold at a price that even Chinese manufacturers are unable to match due to the fact that the large quantity is smuggled from Taftan border.
It is also worth mentioning that presence of Iranian tiles in the country has tremendously increased during the last year. Moreover, imported, smuggled and under invoiced tiles now hold at least 40 to 45 percent market share while the share of local industry hovers between 60-55 percent, they claimed.
They added that in addition to paying ridiculously low duties, Iranian tile-making units enjoy subsidised gas that allows them to keep the price extremely low whereas Pakistan’s industry is either not getting gas or struggling with the high power tariff rates.
Sources said that these frequent hikes in the natural gas prices in addition to availability challenges are acting as major roadblocks for the industry and making it difficult for the units to maintain their competitive edge against these imported tiles.
Kassim said that demand for the domestically manufactured tiles has decreased substantially because of huge price difference that is offered by Iranian tiles and other imported tiles, as it is not a level playing field which such huge difference in the taxes collected from imported and local tiles. Chairman of Pakistan Ceramic Manufacturers Association Mazhar Ali Nasir has also sent an SOS to Chairman of Federal Board of Revenue Tariq Bajwa to order immediate arrest of those who are involved in the matter. He said that being liberal in trade is good but it should not be at the cost of local industry. The collective investment in the industry is over Rs 50 billion and direct employment by the industry is above 10,000 people.
“We urge the government to eradicate the tax anomalies and devise a transparent system for calculating the reasonable duties... along with correct ITP values so that the local industry which faces high utility rates and increase in other inputs can at least have a level playing field,” said Nasir.
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