The Federal Board of Revenue is expected to allow exemption of customs duty and sales tax on the import of grain storage 'silos' for poultry, livestock, grain handling and storage sectors. Sources told Business Recorder, here on Saturday that the Ministry of Finance has approved a proposal of the FBR to grant exemption of customs duty and sales tax at the rate of 16 percent on the grain storage 'silos'.
In this connection, the FBR will issue a notification to allow the exemption prospectively through amendment in the SRO 575(l)/2006. In the past, the FBR had allowed provisional release of certain consignments of grain stored in 'silos' against bank guarantees for providing space to poultry, livestock, grain handling and storage sectors. Following issuance of the notification, the FBR will have to recover the duties and taxes from the persons, who have made provisional release of certain consignments from 'silos'. This is due to the fact that the FBR will allow such exemption with prospective effect. The exemption of customs duty and sales tax would be applicable from the date of the issuance of the notification, sources added.
Detail of the issue revealed that over the last year the import of silos by various industrial sectors has become cumbersome due to some procedural technicalities and legal interpretation of law. Presently, grain storage silos imported by poultry and livestock sectors are exempt from customs duty under Sr. No I of SRO 575(l)/2006, dated Jun 5, 2006 and for sales tax exemption these sectors utilised SRO 727(1)/2011, which covers machinery and equipment. On the other hand, machinery and equipment for development of grain handling and storage facilities are exempt from whole of customs duty and sales tax under Sr. No 2 of SRO 575(I)/2006.
The problem arises because silos are classifiable under Pakistan Customs Tariff (PCT) heading 94.06 with 25 percent customs duty and 16 percent sales tax, but the term machinery and equipment applies only to the items listed in Chapter 84 & 85 of PCT, however being a bona fide requirement field formations of the FBR allowed the benefit of said SRO to 'silos' as an equipment used for 'storage'. This practice, however, was discontinued after budget 2011-12 due to a more strict interpretation of the term 'machinery and equipment' under SRO 575(I)/2006 and SRO 727(I)/2011.
Afterwards the concession available to grain handling and storage facilities was eliminated, many representations were received by the Board, from The Federation of Pakistan Chambers of Commerce & Industry, M/s Rice exporters Association of Pakistan, M/s Pakistan Flour Mills Association and M/s Pakistan Poultry Association, seeking continued clearance of grain storage silos free of duty and sales tax under Sr. No 2 of said SRO. In a few cases, the Board had allowed provisional release of consignments against bank guarantee to mitigate the hardships faced by importers, sources added.