The Prime Minister's Office has reportedly 'compelled' the Commerce Division and the Federal Board of Revenue (FBR) to recommend release of more than 1,000 stuck up used imported vehicles, well-informed sources told Business Recorder.
On November 8, 2019, the Commerce Division stated that under paragraph 15 of the Import Policy Order (IPO) 2016, import of used vehicles are allowed to Overseas Pakistanis under personal baggage, transfer of residence and gift schemes according to the procedure laid down in appendix-e of the IPO, 2016.
There were frequent complaints that the schemes meant for Overseas Pakistanis were being misused by the commercial importers of massive import of used vehicles.
A summary was submitted by the Commerce Division to the ECC which on January 15, 2019 decided that all vehicles in new/ used condition to be imported under transfer of residence, personal baggage or under gift scheme, the duty and taxes shall be paid out of foreign exchange arranged by Pakistani nationals themselves or local recipient supported by bank encashment certificate showing conversion of foreign remittance to local currency under the following mechanism: (i) the remittance for payment of duties and taxes shall be originate from the account of Pakistani nationals sending the vehicle from abroad; and (ii) remittance shall either be received in the account of the Pakistani national sending the vehicle from abroad or in case his account is nonexistent or inoperative, in the account of his family.
The sources said, the ECC decision was implemented through SRO 52(1)/2019 on January 15, 2019. As a result the traceability mechanism of remittance has substantially reduced the misuse of the schemes. However, certain bonafide overseas Pakistanis were also facing problems with regard to payment of duties because of fluctuation in exchange rate and changes in the duty structure of the Federal Board of Revenue (FBR). This had resulted in vehicles being stuck at the ports.
FBR revealed that a total of 1017 vehicles have been stuck at Karachi ports, which can be categorized into the following three types: (i) for which no foreign remittance has been received; (ii) foreign remittance has been received but the remitted amount has been rendered insufficient due to depreciation of PKR before the filing of goods declarations; and (iii) foreign remittance has been received but the remitted amount has been rendered insufficient due to increase in the rate of duty in the Finance Act, 2019.
On September 11, 2019, Prime Minister Office (PMO) directed both the Commerce Division and FBR to resolve the matter of the vehicles stuck at the ports.
Prime Minister Office, in a strong worded letter conveyed to Commerce Division that it has been desired (without name of the desiree) that Commerce Division shall evaluate the possibility of relaxing the condition of payment through foreign currency account with a cap on differential account as proposed by FBR, in order to ensure efficient customs clearance and mitigate the impact of change in currency exchange rate. PMO also directed that FBR shall evaluate the possibility of introducing Electronic Encashment Form to reduce verification time for remittances with special import/ baggage schemes.
"Necessary action be taken and implementation status be shared with PMO Office within two weeks," the sources quoted Additional Secretary to the Prime Minister, Usman Akhtar Bajwa stating in his letter.
In compliance, an inter-ministerial meeting was held in the Commerce Division, Finance Division, the FBR and the State Bank of Pakistan (SBP).
The stakeholders unanimously agreed in the meeting that SRO issued on January 15, 2019 may be amended to the effect that in case the remittance for payment of duties and taxes falls short due to the depreciation of the PKR or increase in taxes subsequent to the remittance, the importer may be allowed to meet the shortfall through local sources.
The Commerce Division proposed that in case Pak Rupee depreciates or government increases the import duties and/or taxes after the receipt of remittance and before the filing of the goods declaration, which results in shortfall of remitted amount vis-à-vis payable duties and taxes, the importer shall be allowed to meet the shortfall through local sources, retrospectively. The vehicles also required customs clearance.
On November 12, 2019, in the federal cabinet meeting, it was pointed out that around 1100 vehicles stuck at the ports due to the new regulations and the government should find a way to let the importers clear them. The representative of Commerce Division explained that the proposals approved by the ECC would resolve the issue.
Copyright Business Recorder, 2019
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