C.B.R. AMENDS DUTY & TAX REMISSION RULES, 2001

C <!--[if gte mso 10]> C.B.R. AMENDS DUTY & TAX REMISSION RULES, 2001 By Akhtar Javed, Advocate, Lahore In supersession of "No Duty No Drawback Rules 1998", C.B.R. vide S.R.O. 185(I)/2001 dated 21-3-2001 introduced "Duty and Tax Remission for Export Rules, 2001" (commonly known as DTRE Rules) which were subsequently merged with other notifications and "The Customs Rules, 2001" were notified through a consolidated S.R.O. 450(I)/2001 dated 18-6-2001. Rules 296 to 307 of the Customs Rules contained in Sub-Chapter (7) of Chapter XII of the said notification pertain to DTRE Scheme. 2. DTRE Scheme entitles the exporters to procure imported and locally manufactured raw materials without payment of customs duty, central excise duty, sales tax and withholding tax for the manufacture of goods meant for export. The exporters operating under DTRE Scheme were facing various difficulties. CBR has made an attempt to remove these difficulties and the Rules have been amended. The salient features of these amendments are given in the following paragraphs. 3. Refund/Adjustment of input tax paid on Electricity and Gas.---CBR vide its letters to various textile mills had categorically ruled that the DTRE Scheme has been framed under the concept of NO DUTY NO DRAWBACK, hence the exporters operating under DTRE will not be entitled to claim refund of sales tax paid on any of the inputs procured for the manufacture of goods for which other raw materials are procured without payment of duty and taxes under DTRE. It was ruled by Chief DTRE CBR 5th Floor Custom House Karachi that the exporters would not be entitled to get refund of input tax paid on electricity, gas, lubricants, spares and other stores. Through the recent amendment. (i) The definition of the term "input goods" contained in clause (f) of rule 296 has been amended which now reads as "input goods" means all goods imported or procured locally including electricity and gas for the manufacture and export; (ii) Clause (g) of rule 296 defines the goods on which DTRE Scheme is applicable. Sub-clause (i) of clause (g) covers goods imported without payment of duty and taxes whereas sub-clause (ii) covers goods procured locally without payment of duty and taxes. Anew sub-clause (iii) in clause (g) of rule 296 has been added which covers electricity and gas which is procured on payment of sales tax; and (iii) A new rule 302A has been added which entitles DTRE approved exporters to get refund/adjustment of sales tax paid on electricity and gas to the extent of proportionate consumption, thereof, in the production of exported goods. No doubt that through the amendments in DTRE Scheme, the CBR Authorities have removed one of the major difficulties being faced by DTRE approved exporters but till now the DTRE approved exporters have not been entitled to get refund/adjustment of input tax paid on spares, lubricants and stores which are procured from the local market on payment of sales tax as under DTRE, Customs Authorities do not allow the exporters to get these inputs without payment of duty and taxes. 4. Procurement of imported input goods free of duty and taxes from another DTRE approved person.---Sub-rule (5) of rule 297 provides that an indirect exporter may also procure duty free raw material and on approval, he shall have the same duty suspension privileges as are being availed by the direct exporter. A new sub-rule (ii) has been added which entitles a DTRE approved exporter to procure imported input goods free of duty and taxes from another DTRE approved person subject to the approval from Collector of Customs granting DTRE approval to the exporter. 5. Sub-rule (6) of rule 297 entitled a DTRE approved exporter to get his finished goods manufactured from anywhere in Pakistan. The said provisions have been amended and now a DTRE approved exporter can get his finished goods manufactured from anywhere in Pakistan but only from the persons registered under the Sales Tax Act, 1990. 6. Amendment in the DTRE approval.--A new sub-rule (9) has been added in rule 297 which entitles a DTRE approved exporter to get his previous approval amended or cancelled. The DTRE approved exporter will be required to apply to the Collector of Customs for amendment in the previous approval or for its cancellation. The Collector of Customs has been required to allow the amendment in the approval or cancellation within 10 days of the receipt of such request. 7. Intimation regarding duty and taxes paid raw material and finished goods.---A new sub-rule (10) has been added in rule 297 which requires an exporter applying for DTRE approval to declare the duties and taxes paid raw material and finished goods inventories at his premises at the time of making application for the DTRE approval. 8. Imposition of 2% surcharge on inputs not consumed within 18, months of the date of approval.---Rule 298 provides that the input goods procured under DTRE shall be utilized in the production and exports within 12 months of the date of approval which period shall be automatically extended upon request; once only, up to a further period of 6 months on payment of 1% per month of f.o.b. value of unfulfilled exports. An amendment has been made to rule 298 which provides that the inputs whether imported or locally purchased not consumed within 18 months shall be subjected to payment @ 2% per month of the value of unfulfilled exports. 9. Unaccounted or unexported goods.---Rule 300 pertains to those goods for which DTRE approved export fails to give proper and documented account of the duty and tax free input goods OR of the unexported finished goods. The said rule has been reshaped as follows: (i) Transfer of duty free input goods to another DIRE approved exporter. A new sub-rule (2) has been added in rule 300 which allows a DTRE approved exporter to transfer his duty and tax free input goods to another DIRE exporter of the same goods; (ii) Disposal of unutilized input goods other than banned items.---A new sub-rule (3) has been added in rule 300 which allows the DTRE approved exporter to dispose of his unutilized input goods other than banned items in the local market on payment of surcharge as per table given below in addition to the liable duties and taxes and payment under rule 298: S.No. Quantity of unutilized input goods Surcharge 1. Less than 10 per cent of unutilized input goods. Nil 2. From 10 per cent to less than 20% of unutilized input goods. 1% of f.o.b. value of unutilized exports. 3. From 20 per cent to less than 30% of unutilized exports. 2 per cent f.o.b. value of unutilized input goods. 4. More than 30 per cent of unutilized input goods. 3 per cent of f.o.b. value of unutilized exports. (iii) Disposal of banned unutilized input goods.---A new sub-rule (4) has been added in rule 300 which allows the DIRE approved exporter to dispose of the banned unutilised input goods subject to the approval of the Ministry of Commerce, on payment of surcharge as per table given above in addition to the leviable duties, taxes and payment under rule 298 and on conditions prescribed by the Ministry of Commerce in this regard; (iv) Disposal of wastage in the local market.---A new sub-rule (5) has been added in rule 300 which allows the DIRE approved exporter to dispose of his admissible wastage in the local market on payment of sales tax leviable thereon; (v) Disposal of B-grade products and factory rejects.---A new sub-rule (6) has been added in rule 300 which allows the DIRE approved exporter to dispose of his B-grade products and factory rejects only up to 10% of the exports as per contract under rule 297 on payment of duties and taxes leviable on finished goods in addition to the surcharge as per rule 298 subject to the provisions of Import Policy Order. 10. Enhancement in the period of post exportation audit.---Rule 305 provided that the liability of DIRE approved exporter shall be fully discharged to a post exportation audit which shall be carried out and completed within a period of three months after the period specified in rule 298. The aforesaid period has been enhanced from three months to twelve months. 11. A new rule 305A has been added, which provides that as a result of post-exportation-audit, if there arises any discrepancy, irregularity or any violation of the rules by the DTRE approved exporter, the same shall be reported to the Adjudicating Officer empowered by the Central Board of Revenue, for adjudication, in this regard.