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In the Name of Allah, the Most Beneficent, the Most Merciful. OUR TOPIC TODAY. “Customs related procedures on export of goods and Revamped DTRE Scheme in the context of Engineering Sector.”. What is the DTRE Scheme?. Duty & Tax Remission for Exports.
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In the Name of Allah, the Most Beneficent, the Most Merciful
OUR TOPIC TODAY “Customs related procedures on export of goods and Revamped DTRE Scheme in the context of Engineering Sector.”
What is the DTRE Scheme? Duty & Tax Remission for Exports. Allows for import AND local procurement of inputs without payment of customs duty, excise duty, sales tax and withholding tax. Facility available only for use in the manufacture of goods meant for export.
Where can we find the DTRE Rules? These Rules are a part of the Customs Rules, 2001 notified vide SRO 450(I)/2001 dated 18.06.2001. DTRE Rules begin at Rule 296 and end at Rule 307 in the above mentioned Customs Rules. (Only 12 Rules in total).
WHAT DO THESE RULES EXPLAIN Rule 296 – Definitions. Rule 297 – Scope of the DTRE facility. Rule 298 – Application for DTRE Approval. Rule 299 – Input-Output ratios & wastages. Rule 300 – Grant of DTRE Approval.
WHAT DO THESE RULES EXPLAIN-2 Rule 301 – Amendment, suspension or cancellation of DTRE Approval. Rule 302 – Acquisition of duty-free inputs. Rule 303 – Acquisition of duty-paid inputs. Rule 304 – Acquisition of locally made inputs. Rule 305 – Utilization of input goods.
WHAT DO THESE RULES EXPLAIN-3 Rule 306 – Export of manufactured goods. Rule 307 – Exports to Afghanistan. Rule 307A – Unaccounted un-exported goods. Rule 307B – Refund of Sales Tax. Rule 307C – Records and documents.
WHAT DO THESE RULES EXPLAIN-4 Rule 307D – Reconciliation Statement. Rule 307E – DTRE Audit. Rule 307F – Power to suspend DTRE facility. Rule 307G – Miscellaneous.
WHAT needs to be done to start using the DTRE Facility Get registered with the Sales Tax Department through your local Sales Tax Collector. Apply over the web through PACCS (www.paccs.gov.pk) to your local Sales Tax Collector by filling out the form appended with the DTRE Rules. Also declare the input-output ratios & wastages of your products as per the appended form.
Some Caution & Some Security Before granting you a DTRE Approval, the Collector may need to verify your production capacity & business turnover from your Sales Tax Profile to ensure that the quantity of input goods applied for is commensurate with your actual production and business capacity. He may also consult the records of IOCO to ensure that ratios & wastages claimed are as per industry standards. If the Collector is satisfied with your bona fides, he shall issue you a DTRE Approval & secure the suspended duty & taxes against prescribed security instruments, which you have to furnish.
How to Proceed Further & Acquire Input Goods Once you have the Approval, you can now freely import/acquire duty-free inputs. Local inputs are to be reported by you to the Regulatory Collector to be fed into PACCS while imported inputs are fed into PACCS by the Customs staff at the port of import. You can also now acquire duty-paid input goods for which you can later claim duty drawback as per the relevant duty drawback notification. If you acquire inputs from registered person, then he is liable to issue you a zero-rated invoice under section 23 of the Sales Tax Act, mentioning therein your Approval No. & date.
How Much Time do you have to Utilize the Input Goods You now need to utilize those inputs goods within eighteen months from the date of acquisition. After utilization, you can now export your goods by filing a Bill of Export or Goods Declaration mentioning therein the Approval No. & date.
WHAT to do now that Export has taken place Within sixty days of the expiry of the utilization period, or even earlier, after export, you will have to file a reconciliation statement with the Regulatory Collector. The Collector will then carry out a post-exportation audit of your record & if you have fulfilled your obligations, your security instruments would be released.
WHAT RECORDS ARE TO BE KEPT & MAINTAINED BY THE DTRE USER Copies of DTRE applications and DTRE approvals. Records of acquisitions of input goods and exports. Record for destruction or other authorized disposal of input goods and output goods. Export contracts or orders and supply contracts or orders.
WHAT GOODS ARE NOT WITHIN THE AMBIT OF DTRE SCHEME The DTRE facility is not admissible to: Polyester Staple Fiber (PSF), Pure Terephthalic Acid (PTA), Raw Sugar, Cooking Oil or Vegetable Ghee or their raw materials. Goods which are banned or restricted under the Import & Export Policy Orders on account of national security, public health and cultural, moral or religious considerations.
Export Facilitation Provisions in the DTRE Rules-1 • Allow the import AND local procurement of all input goods needed for exports production, without payment of customs duty, central excise duty, advance income tax and sales tax. • Such duty-free imports and local procurement are available to direct as well as indirect exporters. • The indirect exporters are those who provide input goods or services to direct exporters for the purpose of export production.
Export Facilitation Provisions in the DTRE Rules-2 • A wider definition of the term “export” that includes any supply of goods: • By an indirect exporter to a direct exporter; • Against international tenders; • To projects or sectors entitled to import or purchase such goods free of duties and taxes; and • To Export Processing Zones.
Export Facilitation Provisions in the DTRE Rules-3 • A wider definition of the term “input goods” that not only includes services but also: • Trims and accessories; • Electricity and gas on which sales tax has been paid; and • Furnace or diesel oil for the generation of electricity used or consumed in the manufacture of export goods.
Export Facilitation Provisions in the DTRE Rules-4 • A wider definition of the term “import” to include: • Purchase of inputs from EPZs. • Purchase of inputs from a Private or Public Bonded Warehouse including Manufacturing Bond.
Export Facilitation Provisions in the DTRE Rules-5 • DTRE Scheme has been granted wide applicability and is available to: • All persons registered as exporter under the Sales Tax Act, 1990. • All commercial exporters engaged in the purchase and export of same-state-goods. • All contracted vendors of foreign manufacturers or foreign buyers. • All persons who make value-addition in the manufacture and export of goods.
Export Facilitation Provisions in the DTRE Rules-6 • DTRE Approval can be sought on the basis of: • Specific export or supply contract or order. • Past export performance substantiated vide Bills of Export or e-Forms or Sales Tax Returns for the past two years. • Past supplies to direct or commercial exporters (in case of indirect exporters).
Export Facilitation Provisions in the DTRE Rules-7 • A consolidated DTRE Approval can be sought by an indirect exporter who has more than one Supply Contract/Purchase Order from a direct or commercial exporter. • Tags and printed materials supplied by a foreign supplier without involvement of foreign exchange from Pakistan are allowed to be imported without any quantitative restriction.
Export Facilitation Provisions in the DTRE Rules-8 • A flexible regime of security instruments in lieu of suspended duty & taxes: • Indemnity bond alongwith the post-dated cheque from a direct and indirect exporter; • Bank guarantee from a commercial exporter; and • Corporate guarantee from exporters in the corporate sector.
Export Facilitation Provisions in the DTRE Rules-9 • Where export under a separate contract can not be arranged out of regular production due to valid reasons, past export performance as well as contract-based DTRE Approval may be granted concurrently for the output goods of the same or different description. • No DTRE application can be rejected without affording a hearing opportunity to the applicant.
Export Facilitation Provisions in the DTRE Rules-10 • A DTRE user may apply to a Regulatory Collector for amendment in the previous Approval or for its cancellation and each such request has to be decided within ten days. • No request for a cancellation of, or amendment in, an existing DTRE Approval can be rejected without affording a hearing opportunity.
Export Facilitation Provisions in the DTRE Rules-11 • The Regulatory Collector may allow a DTRE user to utilize his duty-free acquired input goods for his new Approval if his previous DTRE Approval has been cancelled due to pre-mature termination or cancellation of the export or supply contract or if such input goods have been rendered surplus for any valid reason. • A DTRE user is entitled to claim duty drawback on acquisition of duty-paid input goods subject to the applicable duty drawback notification after full discharge of the liabilities and obligations.
Export Facilitation Provisions in the DTRE Rules-12 • A DTRE user may, with the permission of the Regulatory Collector, dispose of the input goods or output goods within the prescribed utilization period in the following manner, namely: • Return to person who had supplied the input goods. • Sale, by a DTRE user to another DTRE user for export. • Local sale (upon permission by the Collector) on payment of duties and taxes leviable at the time of such sale • Destruction after approval of the Regulatory Collector if goods are not fit for consumption or sale with remission of duty and taxes. • Local sale of B-grade products, factory rejects or wastage on payment of leviable duties and taxes.
Export Facilitation Provisions in the DTRE Rules-13 • Refund of sales tax on electricity or gas or services utilized as input goods for DTRE purpose shall be admissible to a DTRE user as admissible under the Sales Tax Act, 1990 if the value of tax paid inputs other than electricity, gas and services does not exceed 20% of the total value of the DTRE approval.
DTRE SCHEME & THE PROBLEMSOF ENGINEERING SECTOR - 1 The Approval procedure is lengthy and complicated. Utilization period of 18 months is too short. PDCs and IBs remain stuck due to delayed audits.
DTRE SCHEME & THE PROBLEMSOF ENGINEERING SECTOR - 2 Local suppliers of inputs avoid issuing zero-rated invoices. Input-output ratios are not correctly determined. The necessity to apply via PACCS increases the access time to DTRE.
The Approval procedure is lengthy and complicated. A question of balance between quickness and compliance formalities prescribed by rule 300. Bona fides of the applicant. Feeding the Approvals into PACCS. Securing of suspended duty & taxes through IB/BG/CG from direct/indirect, commercial exporters or corporate exporters respectively. Verification of production capacity/business turnover to ensure that import is commensurate with capacity. Verify input-output ratios & wastages are as per industry standard. Collector may have to consult IOCO in this regard. Details of past exports performance or the Contract or both need to be verified. In case of rejection, hearing opportunity has to be afforded.
Utilization period of 18 months is too short. 18 months is from the date of acquisition not Approval. Rule 305 provides for further extension by the CBR. CBR is liberal in granting extensions in individual and deserving cases. However, blanket extension in the utilization period will give rise to compliance issues.
PDCs and IBs remain stuck due to delayed audits. Some onus on the DTRE users because, as per rule 307E, post-exportation audit has to be completed within a period of twelve months after expiry of the utilization period or after filing of the reconciliation statement within sixty days of the expiry of the utilization period, whichever is earlier. However, in specific cases, users are free to approach CBR if there is delay beyond the specified period.
Local suppliers of inputs avoid issuing zero-rated invoices. The apparent reason for this is that local suppliers want to hide the quantum of their business by avoiding documentation. The solution is to identify and report to the Collector or CBR any and all such instances. Rule 304 (2) caters to registered suppliers; hence, the reporting will lead to action.
Input-output ratios are not correctly determined. Sales Tax staff is not supposed to be experts on ratios & wastages. They simply know the law & procedures. Under rule 300 (3) (b), the Collector is free to consult the record of IOCO to ensure that ratios & wastages claimed are as per industry standards. Users are free to disagree and can ask the Collector for a referral to the EDB. Collector is free to avail any forum to establish the bona fides of a DTRE applicant and application. Problems in ratio determination can be communicated to CBR, which can take up specific cases with the Collector.
The necessity to apply via PACCS increases the access time to DTRE. PACCS has been established in the larger economic interest. Identify & specify the problems and let CBR know so that these can be rectified. Before PACCS, DTRE users had to import goods through one particular port because a paper based register was maintained only at one particular Customs station. Since quota debiting was involved, the goods had to travel to the port where the register was placed before clearance could be allowed by Customs. Thus users were incurring transportation cost. All registers are electronic in the PACCS environment and are available online to all Customs formations. With PACCS e-registers, businesses are free to clear their cargo from any convenient port.