How to Calculate Import Customs Duty in Pakistan?
Step by Step guide to calculate Customs Duty
Calculation of Import Customs Duty helps in calculating the total cost of goods when you import them to Pakistan. This can be used in financial feasibilities, budgetary requirements or supply chain finance.
This is particularly important for traders and manufacturers who want to import various goods, to be used for various purposes.
In this post, we will be learning how different duties are levied on imported goods, and then also see how they are calculated. We will also provide you with resources that will help you calculate the duties of any product. Last but not the least, we will also ensure to keep this blog updated to ensure that you are calculating the exact amount of duties every time.
What is Customs Duty, and Why Does it Matter?
Customs duty is a type of duty that is paid to the Government when any good or service is imported from outside the country. In Pakistan, this is usually paid at the time of Customs Clearance.
In Pakistan, when we say that we want to calculate Customs Duty, it means that we want to know all duties and taxes to be levied on your imported good. Also known as good’s duty structure.
When importing goods, an importer must be aware of the duty structure to decide whether it is feasible for him to import the goods or not.
In most cases, a Duty Structure involves the following duties and taxes:
- Customs Duty
- Additional Customs Duty
- Regulatory Duty
- Sales Tax
- Additional Sales Tax
- Withholding Income Tax
- Excise Duty & Taxation / CESS
Customs Duty
This is a basic duty that is levied on imported goods.
Additional Customs Duty
The Federal Government of Pakistan can also impose additional customs duty on imported goods.
Regulatory Duty
This duty is applied only on specific goods that are produced in Pakistan but still being imported from another country.
Sales Tax
A tax paid to FBR (Federal Board of Revenue) for the import of goods. Usually, FBR allows the importer to collect the amount of sales tax from the consumer at the point of purchase.
Additional Sales Tax
Similar to Sales Tax, there is an additional sales tax levied on imported goods.
Withholding Income Tax
This is also known as Advance Income Tax collected by FBR in Advance and is adjustable from your final income tax liability.
Excise Duty & Taxation / CESS
As per the Sindh Finance Act, 2019, CESS tax is also collected for imported goods. Compared to above taxes, this tax is calculated on basis of the weight.
How to calculate Customs Duty, a step by step guide?
Step 1: Know your Product!
To calculate Customs Duty on any good you are required to know the following:
- CFR Price of your imported goods.
- The sea freight cost (in case, the price of your imported goods is for FOB)
- Good’s HS Code.
- Marine Insurance Charges (optional)
Let’s take an example of importing Hats:
CFR Price: 100,000 USD
Weight: 20,000 KGs
Item HS Code: 6505.0000
Step 2: Know your Duty Structure!
Before we begin the calculation, we need to know the Customs Duty Structure of Hats.
For this, please go to official Pakistan Customs Site, WeBOC, and enter your HS Code in the field and press enter.
As per the picture above the duty structure, also known as Tariff Information, is:
| Customs Duty | 20% |
| Additional Customs Duty | 7% |
| Regulatory Duty | 10% |
| Sales Tax | 17% |
| Additional Sales Tax * | 3% |
| Income Tax | 12% |
*Additional Sales Tax is not present in the above image, but as per Sales Tax Act of Pakistan, this is 3% for all items.
Now let us dive into the calculation of Customs Duty.
Step 3: Calculate your Declared Value to Customs!
First and foremost, you are required to calculate the declared value to Pakistan Customs.
To calculate this declared value you are required to add Marine Insurance Amount in USD to the price of your goods. If you do not have Marine Insurance Amount, as per Pakistan Customs, please consider 1% of your CNF Value as Marine Insurance Charges.
| CNF Amount: | 100,000 USD |
| Marine Insurance (1% of 100,000 USD) | 1,000 USD |
| Total of CNF Amount And Marine Insurance | 101,000 USD |
After getting the total you are required to add Landing charges, which are 1% of the Total of CNF and Marine Insurance, as per Pakistan Customs.
| Total of CNF Amount And Marine Insurance | 101,000 USD |
| Landing Charges (1% of 101,000 USD) | 1,010 USD |
| Declared Value to Customs | 102,010 USD |
Now you need to convert your declared value to customs from foreign currency to the local currency,
Step 4: Convert Declared Value to Customs in PKR!
This step is easy, you just need to get exchange rate from NBP Rate Sheet, and convert the foreign currency into Pakistani Rupee.
For simplicity sake, we will take following exchange rate:
1 USD = 100 PKR
| Declared Value to Customs (102,010 USD x 100 PKR) | 10,201,000 PKR |
Now your Customs Duty will be calculated on Declared Value. Let’s start with that.
Step 5: Calculate your Duties!
To calculate Customs Duty, simply multiply the percentages of duties with Declared Value to Customs:
Declared Value to Customs = 10,201,000 PKR
| A) Customs Duty (20% of 10,201,000 PKR) | 2,040,200 PKR |
| B) Additional Customs Duty (7% of 10,201,000 PKR) | 714,070 PKR |
| C) Regulatory Duty (10% of 10,201,000 PKR) | 1,020,100 PKR |
| Total Duties (A + B + C) | 3,774,370 PKR |
Step 6: Calculate Sales Tax!
Now to calculate the sales tax and additional sales tax you are required to add Declared value to customs and Total Duties.
Declared Value to Customs + Total Duties = 10,201,000 + 3,774,370 = 13,975,370 PKR
| A) Sales Tax (17% of 13,975,370 PKR) | 2,375,813 PKR* |
| B) Additional Sales Tax (3% of 13,975,370 PKR) | 419,261 PKR* |
| Total Sales Tax (A + B) | 2,795,074 PKR |
*Rounded to nearest whole number
Step 7: Calculate Withholding Income Tax!
Now to calculate the withholding tax you are required to sum Declared Value to Customs, Total duties and Total Sales Tax. And then calculate Withholding Tax on it.
Declared Value to Customs + Total Duties + Total Sales Tax = 10,201,000 +3,774,370 + 2,795,074 = 16,770,444 PKR
| Withholding Income Tax (12% of 16,770,444 PKR) | 2,012,453 PKR* |
*Rounded to nearest whole number
Step 8: Calculate the Excise Duty
Excise Duty is calculated on Declared Value to Customs, and its percentage is decided through following schedule:
| NET WEIGHT OF GOODS | RATE OF CESS ALONG WITH DISTANCE |
| Upto 1250 Kilograms | 1.20 % of total value of goods as assessed by the Customs Authorities plus 1 Paisa.per. Kilometer |
| Exceeding 1250 Kilograms but not exceeding 2030 Kilograms | 1.21.% of total value of goods as assessed by the Customs Authorities plus 1 Paisa per Kilometer |
| Exceeding 2030 Kilograms but not exceeding 4060 Kilograms | 1.22 % of total value of goods as assessed by the Customs Authorities plus 1 Paisa per Kilometer |
| Exceeding 4060 Kilograms but not exceeding 8120 Kilograms | 1.23 % of total value of goods as assessed by the Customs Authorities plus 1 Paisa per Kilometer |
| Exceeding 8120 Kilograms but not exceeding 16000 Kilograms | 1.24 % of total value of goods as assessed by the Customs Authorities plus 1 Paisa per Kilometer |
| Exceeding 16000 Kilograms | 1.25 % of total value of goods as assessed by the Customs Authorities plus 1 Paisa per Kilometer |
As our Hats are in total 20,000 KGs, we will take 1.25%. Following is the calculation of Excise Duty.
| A) CESS (1.25% of 10,201,000 PKR) | 127,513 PKR* |
| B) Stamp Paper (Default) | 1,000 PKR |
| C) Transportation | 3 PKR |
| Total Excise Duty (A +B + C) | 128,516 PKR |
Step 9: Calculation of Total Duties and Taxes payable!
The following table shows the total duties and taxes that are to be paid to FBR in order to release your shipment from Customs of Pakistan:
| Total Duties | 3,774,370 PKR |
| Total Sales Tax | 2,795,074 PKR |
| Withholding Income Tax | 2,012,453 PKR |
| A) Total Payable to Collector of Customs | 8,581,897 PKR |
| B) Total Payable to Excise Duty | 128,516 PKR |
| Total Customs Duty & Excise Duty (A + B) | 8,710,413 PKR |
So to summarize you bought the goods for
CFR Price: 100,000 USD * 100 PKR = 10,000,000 PKR
And you paid Customs Duty of
Total Customs Duty & Excise Duty = 8,710,413 PKR
So your total price for bringing the goods to Pakistan would be:
CFR Price + Total Customs Duty & Excise Duty = 18,710,413 PKR
Exemptions on Customs Duties and Taxes
Do remember that the above calculation does not include various exemptions that Government of Pakistan provides. These exemptions are given in Statutory regulatory orders (SRO). You can find all such exemption on WeBOC, by entering the HS Code and viewing Exemptions / SRO sections as displayed in the following picture:
So for example, in the case of our hats import, if you were importing hats from China, due to SRO 1640(I)/2019-3991, instead of paying Customs Duty of 20% you will be paying 5% Customs Duty.
You can further know about more SROs from the FBR Official Website.
Summary
Long story short, if you do not want to go in the hassle of calculation of customs duty & taxation, just contact us. We will provide you with exact customs duty and excise calculation.
