The Federal Board of Revenue (CBR) has restored the procedure of SRO 410 for accurate calculation of duty drawback on the import of temporarily imported accessories as well as duty-paid raw materials used in manufacture of export products under SRO 1065(I)/2005. The board on Saturday amended the 'Temporary Importation Scheme' through a notification to settle thousands of pending claims.
Under the new procedure, in cases where temporarily imported goods are used in addition to other imported raw materials on the import of which duties and taxes have been paid and repayment is admissible on export of ultimately manufactured products, the fob price for claiming such repayment shall be the value excluding value of the goods temporarily imported.
According to board's estimates, thousands of pending claims would be settled through this amendment, which were pending following complicated procedure of duty drawback calculation under condition (xiii) of the SRO 1065(I)/2005.
Sources said that most of the pending claims are those where duty drawback has gone in negative figures following calculation under the laid down formula. Now, all such claims are likely to be cleared in the coming days. For this purpose, a specific condition of rescinded SRO.410 has been restored in the revised Temporary Importation Scheme (SRO.1065).
The board has amended the 'temporary importation scheme' to streamline procedure for repayment of duty drawback in case exported goods are manufactured partly from temporarily imported duty-free input goods and from duty-paid input goods procured from the local market.
Details show that the board had amended SRO.1065(I)/2005 last year through a notification under which "in case goods which are to be exported are manufactured partly from duty-free input goods imported temporarily under SRO.1065 and from duty-paid input goods procured from the local market, the repayment of duty as drawback shall be admissible on finished goods on the FOB value. Provided that the amount of drawback is reduced proportionately in a manner that the amount of customs duty applicable at the rates prevalent at the time of calculation of duty drawback on the quantity of duty-free input goods is subtracted pertaining to items specified in the relevant duty drawback".
Sources said that amendment had not facilitated the exporters, as in condition (xiii) of the SRO.1065(I)/2005, the replacement of word "current rates" with "rates prevalent at the time of calculation of duty drawback" has not changed the calculation formula for manufacturers-cum-exporters.
The admissible amount of duty drawback rate was actually reduced due to technical errors in the notification. The procedure for calculation of drawback given in the condition (xiii) of the SRO.1065(I)/2005 needed to be reviewed.
Exporters repeatedly demanded a new amendment to settle the issue for clearance of pending claims, as the duty drawback rates were actually reduced due to ambiguity in the notification.
On the request of business community, the board tried to remove this ambiguity in the calculation through issuances of clarification to the collectors of customs in January 2007. According to the clarification, duty-free portion of accessories was withdrawn from the total rate of duty drawback based on actual calculations made by Input Output Coefficient Organisation (IOCO), Karachi. This was done to calculate duty drawback excluding the portion of non-duty paid accessories used in the manufacture of export products.
Sources said that the clarification of January 2007 did not serve any purpose and it failed to replace the complicated procedure specified in the notification. The exporters continue to face the same technical problems for which it was necessary to restore the old procedure. Thus, the clarification failed to rectify the error prompting the authorities to introduce legal amendment.
Through amendment in SRO.1065 issued on August 11, 2007, the whole procedure has been replaced with the old condition specified in SRO.410 to rescind complication calculation method.