KARACHI: The State Bank of Pakistan (SBP) Monday allowed 100 percent advance payment of the value of Letter of Credit (LC) for the import of sugar by the private sector.
The federal government has recently allowed the private sector to import 200,000 metric tons of sugar to control the soaring prices of the commodity in the domestic market. In order to encourage the private sector, the federal government has also approved reduction of sales tax on import of sugar to 1 percent, reduction of withholding tax and removal of value added sales tax at 3 percent on import of sugar.
The Ministry of Commerce has deiced to allocate the sugar import quota to interested parties first come first serve basis. The minimum quantity of quota allocation to single importer will be 540 metric tons and the maximum quantity of quota allocation will be 10,400 metric tons.
In order to facilitate the import of sugar as announced by Ministry of Commerce, the SBP has asked banks to may process the requests for import of white sugar.
As per terms & conditions announced by SBP, import may be allowed on behalf of those importers, who have been issued permit(s) by the Ministry of Commerce and import may be allowed on Cost and Freight (CFR) Free out basis, as an exception to the instructions given in the Foreign Exchange (FE) Manual.
According to SBP, advance payment up to 100 percent of the value of letter of credit/contract/proforma invoice may be allowed, subject to compliance with other terms & conditions of the FE Manual.
Banks will be required to submit consolidated data of Letter of Credits issued and advance payments made, against issued permits, to SBP's Foreign Exchange Operations Department on daily basis. SBP has also asked authorized dealers to ensure compliance with all other terms & conditions of permit(s) issued by Ministry of Commerce.
As per term and conditions announced by the ministry of commerce, an import, which has been granted sugar import quota under this import scheme, will be bound to open irrevocable LC or made advance payment for the import of allocated amount of sugar within 5 working days of grant of quota.
However, the ministry will cancel the quota, if the importer failed to open irrevocable LC or make advance payment for import of sugar within five working days of grant of quota. The allocated sugar import quota will be valid up to November 15, 2020 only for the active tax payers' importers.
Earlier, the federal government decided to import sugar through the state-run grain trader -Trading Corporation of Pakistan (TCP), however the TCP tender, opened on August 18, was failed to attract the potential bidders and only two parties participated in the tender. The bids were even very higher than prevailing price of commodity in the international. Therefore, the federal government has decided to allow the sugar import to the private sector on concessional tax rate.
Copyright Business Recorder, 2020
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