Duty exemption on farm machinery import restricted: FBR issues budgetary instructions

The Federal Board of Revenue (FBR) on Thursday restricted the exemption of duties and taxes on the import of agricultural machinery, making it available only if it was exclusively used in the farming sector to avoid misuse of the facility by other sectors. In this regard, the FBR on Thursday issued budgetary instructions (2013-2014) to Collectors of Customs for compliance.
According to budgetary instructions, at present, the exemption from duty and sales tax under SRO 575(1)/2006 without any condition has left this concession open to misuse by other sectors. A condition "if used for agriculture sector" is being inserted against relevant sub-heads of Sr. No 1 of the SRO. The concessionary import of chemicals and packing materials at a lower rate of customs duty by pharmaceutical sector has been linked with certification by the Drug Regulatory Authority of Pakistan and the Directorate of Input Output Coefficient Organisation (IOCO), respectively, budgetary instructions said.
The instructions said that the new codes are being created in Tariff in Chapter 87 for newly-indigenized vehicles to incentivise local auto industry. New codes are being created in Tariff for classification of satellite phone (8517.1230) @ 25% and water dispenser (8418.6930) @ 30% to reduce classification disputes and improve import statistics. The FBR said that the tourism sector is allowed 5% concessionary rate on their imports under Sr. 8 of SRO 575(I)/2006, subject to certification by Federal and Provincial Tourism Authorities. In order to regulate this sector's imports, the Directorate of IOCO is being assigned to determine their requirement. The benefit will be allowed against an undertaking which will be released after issuance of installation/consumption certificate by the Assistant Deputy Collector of Customs concerned.
Different types of packing material is allowed at 0% and 5% concessionary rates against Sr. No 24 of SRO 567(1)/2006 subject to certification by the Horticulture Board for export purposes. Since these items can be imported duty-free in the DIRE scheme, the concession under the said SRO is being withdrawn, the board said. Salient features of Budget 2013-14 are summarised below for guidance and implementation:
Relief Measures: In order to further encourage the use of fuel-efficient Hybrid Electric Vehicles (HEVs), the concession in duty and taxes is being further reduced and rationalised according to engine capacity, by superseding SRO 607(1)/2012 dated June 2, 2012 by SRO 499(1)/2013 dated June 12, 2013. Exemption of duty and sales tax is being allowed on import of 'bio re-absorbable vascular scaffold' (heart stents) in chapter 99 under heading 9938(L), FBR's instructions said.
A new PCT code 8539.3920 is created in Tariff for energy saving tubes at 0% duty whereas exemption of sales tax is being allowed by amending SRO 575(1)/2006 through SRO 498(1)/2013 dated June 12, 2013, to encourage the use of energy efficient electrical equipment.
The condition of certification from Alternative Energy Development Board (AEDB) against Sr. No 35 and 35A of SRO 575(1)/2006 is being omitted to streamline the procedure for exempt import of renewable energy resources compatible equipment, the instructions said.
Duty on office/school supplies (PCT Code 3926.1000) is being reduced from 25% to 20% in Tariff to lower their price and reduce classification disputes. Duty and sales tax is being exempted on import of solar submersible pumps by including PCT code 8413.7010 in SRO 575(1)/2006 to encourage use of energy efficient electrical equipment. Duty on water treatment and purifying machinery and equipment falling under PCT code 8421.2100 is being reduced from 25% to 15% to make them accessible to general public, instructions said.
The rate of duty on Medium Density Fiber (MDF) Board falling under PCT code 44.11 is being reduced from 20% to 15%.
Presently, duty free re-import of machinery & equipment sent abroad for repair etc by industrial importers is allowed under PCT code 9918 subject to the condition that the supplier should be the same. Since machinery manufacturers have their service centers around the world, the words "or their authorised service centers" are being included to facilitate and streamline the procedure of re-import of industrial machinery, FBR said.
Revenue Measure: Duty on betel nuts and betel leaves is being increased from 15% to 20% and from Rs 200 per kilogram to Rs 300 per kg, respectively, to discourage their use.
Legislative Changes: The FBR said that the amendment in Section 2 (la) of the Customs Act of 1969 is being made to provide legal cover for filing of transshipment goods declaration in Computerised Clearance System. A new Section 3DDD is being introduced in the Customs Act of 1969 to provide legal cover to the Directorate General of Input Output Co-efficient Organisation (IOCO).
Amendment in Section 14-A of the Customs Act, 1969 is being made whereby terminal operators/custodian of goods will be bound to entertain the delay and detention certificates issued by customs authorities for waiver of demurrage charges. Another amendment in Section 14-A of the Customs Act, 1969 is being made to require the custodian of goods / terminal operator to provide adequate security and residential accommodation to the customs staff.
Sub-Section (4) of Section 32 empowers the appropriate officer to determine payable amount. Presently this section does not cover the liability found on account of Post Clearance Audit. Sub-Section-3A is being included in Sub-Section 4 to fulfill this legal requirement. Amendment in Section 81 of the Customs Act, 1969, is being made to delete post-dated cheque as an acceptable security against provisional assessment. Section 80-A appearing in Sub-Section 2 of Section 83 is being omitted. The reference of Section 80-A under Section 83 is meaningless since Section 80-A is already omitted.
The FBR said that the amendment in Section 179 of the Customs Act, 1969 is being made to fix the adjudication powers in case of exported goods in relation to their FOB value as against duty and taxes in case of imported goods. Amendment in Section 196 is being made to authorise the Director of Customs Valuation to file appeals before the High Court in such cases where he is aggrieved by the orders of the Tribunal. Amendment in Section 202-B of the Customs Act, 1969 is being made to correct the nomenclature as "Customs Service of Pakistan", the FBR maintained.
"These instructions are of illustrative nature only and in case of any inconsistency, the rates given in the Tariff or the notifications or the relevant legal provisions shall prevail. All concerned officers/officials are, therefore, advised to go through the budget documents carefully, so as to avoid any misinterpretation, misunderstanding or misapplication of the budgetary measures. Errors, omissions or lacunae, if any, should immediately be brought to the notice of the Board for corrective action. The above cited budgetary measures shall take effect from 13th June 2013. The Declaration made under the Provisional Collection of Taxes Act, 1931 (XVI of 1931) may be consulted," FBR's instructions added.