The SME Foundation has urged the government to cut duties and value-added taxes in the upcoming budget for the country's millions of cottage, small and medium industries.
The foundation placed the demands while submitting its proposals for 2014-15 at the National Board of Revenue earlier this week.
The foundation said the import level duties and VAT on all base metals used in the light-engineering industry should be withdrawn.
As these base metals are not produced in the country, the reduction in the duties and VAT will not pose any threat to any other industries.
At present, there are 5 percent duties and 15 percent VAT at the import level of the base metals.
It said the supplementary duties on imports of plastic pipes should go up to 100 percent from 30 percent now to discourage imports, as the country's major plastic products manufacturers are producing quality products and are capable of meeting the local demand.
The 25 percent duties on the imported raw materials used in the electric switch, plugs, sockets, holders, multi-cords and other electric accessories, plastic products and melamine products should be cut down to 10 percent to help local industries cut their production cost.
The duties were increased to the current level from 12 percent in 2012-13.
In one of the proposals, the foundation said there are 25 percent import duties and 20 percent supplementary duties on the imports of some spices such as cumin, cinnamon, red pepper and cardamom.
But the supplementary duties should be withdrawn as these spices are not grown in the country, and as a result, the cost of production of the food items using the spices is skyrocketing.
The withdrawal of the supplementary duties will also discourage smuggling of the spices into the country, the foundation said.
The raw materials for the light-engineering industry are normally sourced from the local markets and are subject to paying import duties and VAT.
But the entrepreneurs of these small and medium enterprises cannot use VAT rebate as they do not have papers showing they pay VAT at the import stage, forcing them to pay 15 percent VAT on sales.
"As a result, they are facing tough challenges with the imported goods and products. This has led many factories to close their operations," SME Foundation said.
So, those who cannot avail themselves of VAT rebate at manufacturing stage should be entitled to 3 percent VAT instead of 15 percent, it said.
It said there should be 100 percent rebate on the VAT paid against electricity and telephone bills and insurance for small industries, instead of 80 percent at present.
The 15 percent VAT on the usage of internet should be withdrawn, as the users have to pay higher prices compared to the users in many countries for the tax.
The 15 percent VAT on the locally produced toys should be cut to zero for temporary period as many factories have already been closed due to the high tax measure.
“These industries don't have ability to pay VAT. Due to the high VAT rate, foreign products have flooded the market,” the foundation said.
The 15 percent VAT on parts used in gas generators should be withdrawn to help businesses maintain their operations in a cost effective way in the event of load-shedding and power outage.