Duty cut likely on items entitled to drawback

The Central Board of Revenue (CBR) has decided to reduce customs duty on all those raw materials/items on which the manufacturers-cum-exporters are claiming extraordinarily high amount of duty drawback. The CBR is compiling a list of inputs used in the manufacture of exportable goods where exporters are still enjoying high DDB rates. The reduction in customs duty on the import of raw materials used in the manufacture of goods to be exported will reduce the overall amount of duty drawback paid to the exporters. The CBR has paid over Rs 13 billion as duty drawback to the exporters in July-April (2004-05), against Rs 11.773 billion in the corresponding period of last fiscal year.
Despite tariff rationalisation in the current budget, the customs had to pay this huge amount as rebate to the export industries. This clearly shows that CBR was unable to achieve the objective of controlling the phenomenon of duty drawback. Now, further tariff rationalisation would ensure a reduction in the quantum of duty drawback and rebates from next fiscal year. Under section 21 (c) of the Customs Act, 1969 (IV of 1969), the CBR has only authorised repayment of customs duty paid on the importation of the raw materials used in the production or manufacture of the goods and exported after fulfilment of laid down conditions.
The CBR has asked the director Input Output Coefficient Organisation (IOCO), Karachi to submit the list of all such inputs used in the manufacture of exportable products to the Customs Budget Wing for tariff rationalisation, sources said.
During the current fiscal year, the CBR issued many notifications to reduce duty drawback for all leading sectors. However, lesser payment of duty drawback is only possible if duty rate is cut on the high dutiable inputs in budget. This will also be instrumental in immediate settlement of disputed duty drawback claims pending with the department, and reduce fresh claims.
Sources said that the CBR Export Wing has to issue many new notifications in 2005-06, keeping in view the tariff rationalisation on large-scale. However, it is not clear whether the concept of 'compensatory duty drawback' payment to certain industries will continue in next fiscal year or not.