Industrial manufacturing in Pakistan relies extensively on imported capital plant machinery, technological upgrades, and industrial raw material inputs. Under the statutory customs tariff framework, importing capital equipment under standard tariff lines can incur customs duties up to 20%, additional customs duties of 6%, and punitive cascading sales taxes.
To protect industrial growth and energy security, Pakistan Customs provides powerful statutory concession regimes through the Fifth Schedule to the Customs Act 1969, SRO 678(I)/2004 (for power, mining, and infrastructure projects), and SRO 565(I)/2006 (for industrial manufacturing raw materials).
Understanding how to map your consignment to these concessions enables industrial enterprises to legally save millions of rupees in landed capital expenditure.
Concessionary statutory orders (SROs) and Fifth Schedule parts supersede standard first schedule tariffs. However, to claim these benefits at Custom House Karachi, importers must provide certified manufacturing certificates, vendor technical drawings, and valid corporate regulatory quotas.
The Fifth Schedule to the Customs Act 1969
The Fifth Schedule is structured into distinct statutory parts, each tailored to specific industrial sectors:
Part I: Capital Goods and Plant Machinery
- Eligible Items: Complete industrial production lines, automated CNC machine centers, injection molding equipment, pharmaceutical processing plants, and food packaging systems under HS Chapter 84 and 85.
- Concessionary Duty Rate: 0% to 3% Customs Duty (instead of standard 20%).
- Statutory Condition: Equipment must not be manufactured locally, as determined by the Engineering Development Board (EDB) and Customs General Order (CGO) 11/2007.
Part II: Renewable Energy & Power Generation Equipment
- Eligible Items: Solar PV modules, wind turbine generators, specialized inverters, and high-voltage grid equipment.
- Concessionary Duty Rate: 0% Customs Duty and 0% Sales Tax under statutory green-energy provisions.
Part III: Industrial Raw Materials and Intermediates
- Eligible Items: Specialty chemical precursors, active pharmaceutical ingredients (APIs), packaging barrier films, and polymers imported by registered industrial manufacturers for in-house production.
- Concessionary Duty Rate: Reduced customs duties from 11% or 16% down to 0% or 5%.
Pakistan Customs Duty & Demurrage Calculator
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Comparative Matrix: Major Pakistani Import Concession Regimes
| Concession Instrument | Target Beneficiaries | Typical Concessionary CD | Key Required Documentation | Approval Authority |
|---|---|---|---|---|
| Fifth Schedule Part I | General Industrial Manufacturers & Commercial Importers | 0% to 3% | Machine layout, technical catalogs, EDB non-local certificate | Custom House Appraisal / EDB |
| SRO 678(I)/2004 | Exploration, Mining, Power Generation & Infrastructure | 0% to 5% | Project sanction letter, regulatory quota approval, indemnity bond | Ministry of Energy / Petroleum Division |
| SRO 565(I)/2006 | Registered Industrial Assemblies (Auto, Electronics, Appliances) | 0% to 10% | Input-Output Ratio Certificate (IORC), provisional quota passbook | Engineering Development Board (EDB) |
| CPFTA Phase-II | Importers of Chinese Origin Goods | 0% to 5% | Form-7 Certificate of Origin, Electronic Data Exchange (EDE) | China Customs / CCPIT |
SRO 678(I)/2004: Large-Scale Capital Project Imports
SRO 678 is one of the most critical legal instruments for project logistics in Pakistan. Designed for energy, petroleum exploration, and large-scale mining developments, it allows eligible entities to import heavy plant equipment, specialized cranes, drilling rigs, and heavy-duty logistics carriers under 0% Customs Duty.
Core Compliance Protocols under SRO 678:
- Corporate Entitlement: The importer must hold a valid concession agreement or regulatory exploration license from the relevant federal ministry.
- Indemnity Bond / Post-Dated Cheques: Importers often furnish an indemnity bond to Pakistan Customs guaranteeing that the equipment will be utilized exclusively for the sanctioned project and will not be commercialized or sold in local markets without prior payment of deferred duties.
- Temporary Importation & Re-Exportation: SRO 678 facilitates temporary import for specialized project equipment that will be re-exported after project completion, avoiding full capital customs duty outlays.
If a single sub-assembly of an imported manufacturing plant is listed in CGO 11/2007 as locally manufactured in Pakistan (such as electrical control panels, steel structural frames, or piping), that specific sub-component will be assessed at standard full tariff rates unless granted an explicit EDB waiver.
SRO 565(I)/2006: Raw Material Concessions for Industrial Manufacturers
SRO 565 is tailored for industrial assemblers and original equipment manufacturers (OEMs). It permits the import of raw materials, sub-components, and sub-assemblies at concessionary customs duties to foster domestic manufacturing.
The Input-Output Ratio Certificate (IORC) Process:
To import raw materials under SRO 565 through Custom House Karachi, manufacturers must undergo an operational audit by the Engineering Development Board:
- Capacity Audit: EDB engineers verify factory machinery, workforce, and monthly consumption capacity.
- IORC Issuance: The EDB issues an Input-Output Ratio Certificate specifying exactly how many kilograms or units of raw material are required to manufacture one unit of finished product.
- WeBOC Passbook Registration: The approved quota is loaded onto the importer WeBOC profile as a digital passbook. Each time a Goods Declaration is filed at KPT or Port Qasim, consumed quantities are deducted automatically from the annual quota balance.
Need On-Ground Clearance at KPT, Port Qasim, or SAPT?
Speak directly with Sultan Mahmood and our senior customs appraising team. We audit commercial invoices, file advance Goods Declarations (GD), and coordinate zero demurrage releases.
Avoiding Clearance Delays When Filing Concessionary GDs
Filing Goods Declarations under Fifth Schedule or SRO concessions requires higher scrutiny by the Customs Principal Appraiser:
- Advance Technical Literature Submission: Provide comprehensive manufacturer brochures, technical schematics, and functional descriptions showing how the machine operates in the industrial production cycle.
- Pre-Arrival Tariff Classification Audit: Ensure the 8-digit HS code declared strictly corresponds to the item description listed in the statutory SRO table.
- Maintain Clear Box Markings: Ensure physical container contents display clear machine serials and indelible nameplates matching the commercial invoice. Mismatches during wharf examination at SAPT or KPT cause lengthy appraisement holds.
Partnering with an authoritative customs clearing agent with deep expertise in industrial classification and EDB quota management ensures industrial enterprises unlock the full financial benefits of statutory concessions without risking wharf demurrage penalties.
Frequently Asked Questions
The Fifth Schedule is a statutory tariff mechanism that grants reduced or 0% customs duty on capital machinery, plant equipment, renewable energy equipment, and raw material inputs that are not manufactured locally in Pakistan.