Pakistan footwear industry has submitted proposals to the ministry of finance aimed at to boost the production and export of the footwear industry in Pakistan. Federal Minister for Finance Shaukat Fayyaz Ahmed Tarin is likely to present the federal budget for 2021-22 in the parliament in the 2nd week of June 2021.
Pakistan Footwear Manufacturing association has always worked towards the betterment and sustainability of the Footwear sector of Pakistan. They aim to increase dependency on indigenous productions of Footwear products and decrease reliance on imported products to help Government save valuable foreign exchange and build export-oriented Industry for Pakistan. Under this objective, PFMA Chairman has taken this responsibility to propose to the Government to undertake vital policy reforms in the coming Fiscal budget 2020-2021. These steps play a crucial role in the survivability of the Footwear industry of Pakistan as it going through a transformational phase, which required immediate Government attention to introduce concessional policies to help the industry sustain its status under the current competitive business environment.
PFMA proposal covers all key areas necessary for the Footwear industry’s survival and is mainly overlooked by policymaker while preparing the fiscal budget.
Some of the most urgent recommendation key points are as follow:
Extension of Scheme – Local Taxes and Levies Drawback
The incentive of Local Taxes and Levies Drawback notified vide SRO 711(1)/2018 dated June 08 2018, be extended for another term of 3 years (July 2021 to June 2024) and be enhanced to 4%, to enable us to position in the international market.
The economy is increasingly driven by import-based consumption. Investment in the industry is much less than in our neighboring countries. The only sustainable solution is waiving off ACD and RD on all raw materials for the footwear industry and put them in the lowest slab of custom duty to promote the “Made in Pakistan Policy”.
Fixed Duty Proposal
Import duties on ready shoes must be fixed in dollar terms irrespective of FOB price. This shall stop under-invoicing. Another positive impact would be on low priced imported shoes, which will be on actual value (expensive), resulting in the gearing-up of local manufacturers. Under invoicing to be discouraged through further uniformity in ITP value. It will give a level playing field to local products(vis-à-vis); the imported products custom duty on shoes must be fixed in dollar terms irrespective of FOB Price as detailed below.
Men shoes @ US$ 5.00 per pair. (in equivalent Pak Rupees)
Ladies Shoes @ US$ 4.00 per pair (in equivalent Pak Rupees)
Children Shoes@ US$ 3.00 per pair (in equivalent Pak Rupees)
This will eliminate under-invoicing. Another positive impact would be that it will allow the local manufacturers to manufacture shoes locally and substitute the import. As for the international Branded shoes, their ITP value may be determined by Custom Authorities as per rules and regulations, and customs duty and other taxes are applied at existing rates. It is also suggested to review ITP Valuation Ruling on a half-yearly basis to manage the pricing in the true sense.
Zero Duty System to Promote “Made in Pakistan” Vision
Zero Duty System must be implemented in order to promote the ‘Made in Pakistan’ Vision. All machinery and software related to Footwear Industry must be exempted from duties under the vision ‘Made in Pakistan’. Exemption from all taxes on income for enterprises commencing commercial production by June 30, 2020, in all industrial estates should also be allowed for the next ten years. It is proposed to restore tax credit under section 65D for newly established industrial undertakings for a further period of 5 years.
These Policy reforms will help Footwear Industry to overcome challenges vital for their survival and sustainability.
Footwear exports from Pakistan
Pakistan leather industry export proceeds during the first nine months of July – March 2021 reduced by 2.54 per cent to US$ 640.02 million against US$ 656.71 million, earned in the eight months of last fiscal year July –March 20, says data released by the Federal Bureau of Statistics (FBS).
The breakdown of export shows that the footwear exports recorded a fall of 5.15 per cent in terms of value between July and March 2020-21. During this period, footwear export reached US$98.98 million by exporting 13.290 million pairs as against US$ 104.35 million for 11.560 million pairs shipped in the same nine months of the previous fiscal year. However, the quantity rose by 14.97 per cent during this exporting period.