Reduced ITP on ceramic tiles clears way for huge smuggling

M. Sameer
What seems to be negligence from part of Federal Board of Revenue (FBR), the ITP (Import Trade Price) has been further reduced to $1.82 per square meter to Iran, causing massive injury to the local ceramic tiles industry.
The ceramic tiles’ industry which is a big revenue earner to the national exchequer is already battling for its survival due to exorbitant cost of natural gas.
FBR has also reduced the ITP on ceramic tiles import from China, Europe and Middle leaving no chance for the local industry to survive. “Why the FBR is all out to ravage the ceramic tiles’ industry”, a local manufacturer lamented. How the situation of dumping of Iranian and Chinese tiles has become horrible can be visualized that tiles worth around $2 billion just from Iran have been smuggled and dumped at Karachi and Lahore’s dealers and retailers’ godowns while situation of rest of the country’s outlets is not at all different, manufacturers claimed.
Interestingly, these tiles have been imported under alleged wrong PCT heading 2713.200 attracting 10 percent duty, causing loss of billions of rupees to the national exchequer, market sources told The Pioneer-Pakistan.
The industry is facing problems because of energy crisis and law and order situation in the country. Besides, the government has levied 2 percent additional sales tax on locally manufactured tiles and resultantly they are disadvantageous position as compared with the imported tiles.
Moreover, the major threat to the local industry is smuggling and import of tiles at grossly under invoiced values, mis-declaration of description and clearance of goods under wrong PCT headings attracting lower rate of duty.
The import data reveals that a large number of consignments of Iranian origin tiles were released in the price ranging from $ 0.60 to $ 0.16 per square meter as against $ 2.17 and above per square meter from China vide Valuation Ruling No 518/2013. However, there is no current Valuation Ruling for Iranian tiles.
According to ceramics manufacturers, the ITP prices fixed prior to the ruling number 758/2015 were lower, and the ex-works price in China of tiles of sizes which are imported in large quantity’s are higher.
Over the last five years, the valuation of tiles from China has been reduced by more than 25 percent whereas all the input costs in China regarding labor costs, energy cost and the currency valuation against the US dollar has increased by more than 35 percent.
Moreover, the inflation in China over the last ten years has cumulatively gone up by 26 percent whereas in the same period the valuation of tiles has been reduced, sources added.
The current valuation the ITP for China has been fixed the same has been used to fix valuation of tiles from Iran, which the manufacturers claimed was entirely wrong method.
China and Iran are independent countries with different economics and have different input costs and volumes of scale. China being the largest producer in the world has volume advantage, while Iran does not have than China without any basis is damaging local tiles manufacturing industry.
The manufacturers said that average raw material cost including glaze cost, clay costs and other pigments/color cost on a conservative basis, will be over $ 1.3 per meter. The average gas consumption to produce one meter of tile is 3.9 MMBTU, the cost of gas in China is $4.9 which translates to about $ 0.7 per meter. These two inputs together without labor and other factory overheads is more than $ 2 hence, it is not possible to produce and sell a tile at the lower value.