Exporting EPZ products to tariff areas: FBR rejects Industries Ministry proposal

The Federal Board of Revenue (FBR) has opposed the proposal of the Ministry of Industries and Production to allow units of the Export Processing Zones (EPZ), Gawadar, to export 80 percent of their total production to tariff areas.
Under EPZ Rules notified under SRO 450(I)/2001, units established in export processing zones, as a general policy, have been allowed to export only up to 20 percent of their total production to tariff areas in Pakistan, while 80 percent of it is required to be exported to other countries. Since EPZs are primarily required to facilitate exports, FBR is against the proposal to give permission to units located in Gwadar EPZ to export 80 percent of their production to tariff area.
Sources told Business Recorder on Tuesday that the proposal to allow 80 percent of the export products of the EPZ in the local areas of Pakistan is against the basic concept behind creation of such zones. Secondly, if 80 percent of the EPZ production is sold within the tariff area, it would have serious implications on the domestic manufacturers and industrial sectors.
The FBR had received a proposal of the ministry that units being set up in Gawadar Zone may be allowed to export 80 percent of their production to the tariff area of the country on payment of normal duties and taxes. The board was of the view that the existing policy of 80:20 should be followed in case of Gawadar as well, which would be in line with existing EPZ Rules. The concept of the EPZ is to allow maximum exports, whereas local sale of these export-products should be minimised.
Sources said that the EPZs are primarily set up for promoting exports from the country. If the government would permit major part of production to tariff areas, it would be against the objectives of EPZs, besides having negative effects on local industry.