Non-refund of security deposits make importers suffer

Importers of the finished goods made of artificial leather are facing serious liquidity crunch as the Customs department appears reluctant to refund security deposits amounting to around Rs 1.5 billion to meet its annual revenue target, despite dispute resolution related to SRO 1070(I)/2017.
Federal Board of Revenue (FBR) through SRO 1070(I) dated October 23, 2017 replaced the words 'article of leather and artificial leather' that was mentioned in SRO 1125((I)/2011 with 'leather sectors ready to use by the general public.'
Resultantly, the Customs department has raised admissibility issue of finished goods made of artificial leather ready to use by the general public for concessionary sales tax rate of 6 percent in terms of SRO 1125(I)/2011 as amended vide SRO 1070(I)/2017.
However, the trade was of the view that finished goods of leather and artificial leather were awarded similar treatment for sales tax purposes under the SRO 1125(I)/2011. Therefore, finished products of artificial leather are also entitled for concessionary rate of 6 percent sales tax, despite the issuance of SRO 1070(I)/2017.
The Customs Collectorate had begun disallowing concessionary rate of 6 percent sales tax and charging 17 percent sales tax on the finished products of artificial leather ready to use for general public. Later, the board has issued instructions, directing the Collectorate to clear the consignments against two pay orders - 6 percent as sales tax while rest of the 11 percent under the head of security deposit till the resolution of dispute. Finally, after almost nine months, the board has resolved the issue by inserting artificial leather in SRO 1125(I)/2011 through SRO 777(I)/2018 on June 21, 2018.
However, the Customs department is now reluctant to refund security deposits, which has piled up to nearly Rs 1.5 billion since October 2017 in order to meet its annual revenue target, despite dispute resolution, said Arshad Jamal chairman Supreme Council of All Pakistan Customs Agents Association (APCAA).
"Instead of returning pay orders submitted under the head of security deposits for the clearance of consignments, the Collectorates are now doing encashment to meet its annual revenue target," he said, terming it as serious violation of Customs laws.
Replying to a question, Arshad said the APCAA delegation immediately met the Collector Appraisement East, following the encashment of security deposits and stopped such attempt to meet revenue target.
Moreover, he said that the collectorates, despite several requests, intimated them that security deposits would not be released till June 30, 2018, engendering serious liquidity issues for the importers.
He also urged the caretaker Finance Minister Dr. Shamshad Akhtar and FBR chairman Tariq Mahmood Pasha to look into the matter and issue instructions to the concerned Collectorate for the immediate release of security deposits in order to facilitate the trade at maximum.