LAHORE: Customs authorities are allegedly violating the legal provisions made by the State Bank of Pakistan for import of goods and charging duties on the basis of the date of import to make imports more expensive and waste of valuable foreign exchange.

Sources from among the tax practitioners said that as per Foreign Exchange Manual, Letter of Credit (LC), Registered Bank Account (RBA), Documentary Collection (DC), Open Account (OA) and Advance Payment (AP) are the recognized modes of payment. After entering into a contract, when the importers open Electronic Import Form (EIF) through a bank for the payments to be remitted by the bank to the seller on the basis of contract and EIF, importers are only given option to make payments through LCs and no other option is provided for making payment and accordingly for valuing the goods, they added.

According to the sources, there is no difference between a letter of credit and registered banking contracts both the modes of payment are recognized by the SBP. However, a discriminatory approach is adopted by Customs officials in selective cases and they change parameters for assessing the imported goods, which is violation of the provisions made by the SBP.

However, the Customs authorities are of the view that the importers willfully declare the bank contracts as letter of credit just to evade the legal duties/taxes and attempt to have the goods assessed on superseded values.

But tax practitioners have stressed that letter of credit, letter of guarantee, bank guarantee, demand draft, documentary collection, open account and registered bank contract are all recognized modes of payment in a general business sense. These arrangements are made to facilitate the payments between a buyer and a seller, whether locally or internationally, which admittedly prevailed internationally, they added.

They have further pointed out that general agreement on tariffs and trade (GATT) also favours this mechanism to provide a fair, uniform, and neutral system for the valuation of goods for Customs purposes to prohibit the use of arbitrary or fictitious values, which has been woven in the Customs law of the country.

Copyright Business Recorder, 2023