Ban on POL export to Afghanistan: facility of zero ST, CED, rebate, automatically withdrawn

The government has imposed ban on export of locally produced POL products to Afghanistan, which resulted in automatic withdrawal of zero-rating of sales tax, rebate of central excise duty, repayment or drawback of customs duty and refund of the petroleum levy on export of POL products to Afghanistan and Central Asian Republics (CARs).
A senior government official told Business Recorder here on Saturday that the Economic Co-ordination Committee (ECC) of the Cabinet had announced ban on POL product export to Afghanistan and CARs, proposed by Ministry of Petroleum and Natural Resources.
Explaining the decision, he said that the ban has been imposed on the locally produced POL products to check their movement outside the country. However, the import of POL products for re-export to Afghanistan is still subject to the rules and regulations of the Ministry of Petroleum, Commence Ministry and Federal Board of Revenue (FBR).
When ban has been imposed on the export of the locally produced POL products to Afghanistan, there is no relevance of drawback and rebates on it. Resultantly, zero-rating of sales tax, rebate of central excise duty, repayment or drawback of customs duty and refund of the petroleum levy on export of POL products to Afghanistan would automatically be withdrawn. The said rebates and drawbacks would not be applicable following the decision of the ECC, official added.
Sources said that the FBR and the Ministry of Commerce had agreed to the proposals of the Petroleum Ministry. According to the Summary approved in the last ECC meeting, Ministry of Petroleum and Natural Resources has proposed the ECC for withdrawal of all the tax and duty exemptions available on export of POL products to Afghanistan and CARs. In this regard, Ministry of Commerce is expected to amend Export Policy Order. The Federal Board of Revenue will also amend its customs procedures notified on POL exports.
Details show that existing Export Policy Order, notified by the Ministry of Commerce allows duty/tax exemptions on export of all commodities produced or manufactured in Pakistan if exported in convertible currency.
The said Export Policy Order provides separate and exclusive Clause-7, for exports to Afghanistan and via Afghanistan to Central Asian Republics. In addition, there is a provision especially with reference to exports meant for International Security Assistance Force (ISAF) and Defence Logistic Support Centre (DLSC) in Afghanistan. It has always been the policy of Ministry of Petroleum and Natural Resources to prioritise local demand of POL products and surplus, if any, allowed to be exported.
It is hardly identifiable as to whether export quantities pertain to local refinery production or the imported product. However, the case for jet fuel is quite different, as it is supplied to International agencies in Afghanistan by PSO, Shell and other OMCs under commercial agreements, procured from local refineries and through imports. Accordingly, Ministry of Petroleum and Natural Resources has notified the oil industry including Refineries and Oil Marketing Companies to abstain from distributing petroleum products (exports) produced by the local refineries. If any of the oil marketing companies wants to export petroleum products to Afghanistan that shall only be made from imported volumes, especially procured for export purposes under transit trade policy as amended from time to time by Ministry of Commerce and FBR), sources said.
Sources further said that the there is possibility that export volumes meant for Afghanistan are being dumped and distributed in the local market due to price differential between local and export prices of the petroleum products leading to misuse of duty drawbacks and tax exemptions available vide clause-7(2) of the Export Policy Oder. There are also chances of illegal exports/smuggling of petroleum products to Afghanistan. Therefore, there is a need to reconsider the issues involved in the export to Afghanistan as the Ministry of Petroleum and Natural Resources has to ensure that there is no shortage of petroleum products in the country and also to discourage dumping of products.
Ministry of Petroleum and NR, therefore, recommended for the removal of duty/tax exemptions provided in the existing Export Policy Order with regard to export of petroleum products to Afghanistan including refund of Petroleum Development Levy and GST etc unless there is a Government to Government contract, but will be done through oil marketing companies only. However, export of surplus JP8 declared/decided in the Product Review meeting will be allowed to be exported by the refineries or oil marketing companies. If any of the oil marketing company wants to export JP-8 to Afghanistan that shall only be made from imported volumes especially procured for export purposes, through foreign exchange remittance from the buyer. Ministry of Commerce and FBR may amend the policy accordingly.
The summary was circulated to Ministries of Commerce, Finance, Planning and Development Division, Ogra and FBR. The stakeholders had endorsed the proposal on withdrawal of tax and duty exemption available on export of POL products to Afghanistan and CARs. It is important to mention that the section 7 of the Export Policy Order 2009 relates to Exports to Afghanistan and through Afghanistan to CARs.