ISLAMABAD: The Federal Board of Revenue (FBR) has proposed to allow local sales of 30 percent of the finished products required to be exported after procuring duties and taxes free inputs under the unified export promotion scheme. Small and medium exporters told Business Recorder that the FBR’s move to allow sales of such goods in the local market is a serious distortion in the whole scheme of the duties and taxes free imports of raw materials/inputs solely with the purpose of finished products export. Apparently, it would facilitate a few big exporters who are also engaged in manufacturing and sale of goods under some local brand names in the same business entity. This would allow such big exporters to sell 30 percent of their finished products in the domestic market without actual payment of duties and taxes at the import stage.
In this way, only some big brands would benefit from the scheme whereas some portions would be exported and the remaining would be locally sold under the new scheme. This would also put other local manufacturers at a disadvantageous position after issuance of the unified export promotion scheme.
Exporters pointed out that the certain provisions of the unified export promotion scheme would create serious distortion in the whole scheme of exports putting few exporters at an advantageous position. Interestingly, the FBR had sought comments from the chambers which are not related to the exporters.
The FBR has not directly approached the key export associations to seek comments on the proposed scheme, exporters alleged.
Industry sources further alleged that the draft notification was officially sent to Patron- In-Chief, not to send any legitimate office bearer of the association and the FBR is directly consulting with the Patron-In-Chief, who has no official charge of the association instead of actual official bearers.
Under the proposed new scheme, the FBR has introduced the concept of domestic sales. There should be no concept of domestic sales in the existing scheme. The local input goods shall be integrated with the Sales Tax Return data instead of entered manually by the users, they said. A question arises
that how the good declaration (GD) of local sales correlated between real time updated data into Weboc system and Pakistan Revenue Automation Limited (PRAL) data on account of point of sale (POS) and how the finished goods will reconcile, keeping in view that FBR is trying to launch the track and trace system from start to end consumer.
They informed that they have serious concerns over the shifting of audit to PCA because it is practical not possible to carry out the physical audit record from one city to another city, keeping in view that the Audit has been proposed to be transferred to the Post Clearance Audit (PCA) without any consultation and recommendation of major stakeholders like exporters. PCA have only two/three offices across Pakistan, some are not yet properly working.
The exporters falling within the category of small and medium size are worried about the major shift of powers to the Input Output Coefficient Organization (IOCO) and PCA.
Exporters have raised the followings questions: - Whether only two offices Directorate of IOCO have capacity to give services to exporters across Pakistan?
Whether it is practically possible for small exporters to physically go to IOCO office from Peshawar to Lahore and Quetta/Sukkur to Karachi to deal and follow up cases?
Presently, the IOCO, Islamabad office is not yet operative since its establishment, and only one Additional Director-IOCO is sitting and working in IOCO, Lahore office, while three Additional Directors are required. How this office would simultaneously deal with the exporters from Peshawar to Multan including Lahore.
Whether the small and medium exporters, having exports of 1-10 containers per month, can afford the additional cost of consultant or permanent employee at Lahore office to deal with Directorate of IOCO, they questioned.
Is it practical possible to carry out the audit record of physical files from Peshawar to Lahore, they added.
Due to unjustified policy shift, exporters will face more problems during processing of their export promotion schemes related approvals and security instruments submission and subsequent release of securities after reconciliation.
Copyright Business Recorder, 2021
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