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ISLAMABAD: The Federal Board of Revenue (FBR) has allowed investors licensed as industrial units in the Gwadar Free Zone (GFZ) to provide sub-contracting or vendor services for units located in the tariff areas of the country.

According to the Gwadar Tax Free Zone Rules, 2021 issued by the FBR, after approval of Collector of Customs, the investors licensed as industrial units in the free zone shall be allowed to provide sub-contracting or vendor services for units of the tariff area.

The subcontracting shall be allowed only for partial processing, embellishment, decoration or further manufacturing.

The licensed industrial units shall apply on the form as set out to the regulatory Collector.

The facility of sub-contracting shall be restricted to only such type of goods which are capable of identification before leaving the Gwadar Free Zone (GFZ) area, and re-entry into the GFZ after the goods have been processed, embellished, worked and further manufactured. The investor shall then furnish a bank guarantee equivalent to the amount of duty and taxes involved from a scheduled bank of Pakistan in case the goods are importable in the tariff area of Pakistan, and if the goods are not importable then in addition to the amount of duty and taxes leviable, an amount equal to the value of the goods, the FBR said.

The rules said that the duty and taxes shall be paid by the units of tariff area units on value addition.

Subject to the approval of regulatory Collector, the industrial units operating in the tariff area shall also be allowed to provide sub-contracting or vendor services for industrial units of the free zone on such conditions, restrictions and limitations as may be prescribed.

The subcontracting shall be allowed only for partial processing, embellishment, or decoration.

The subcontracting shall not be allowed without pre-determination of input-output ratios. The licensed industrial units shall apply on the form as set out in Appendix-HI to the regulatory Collector.

The facility of subcontracting shall be extended on submission of copy of work contract and after physical verification of the manufacturing facility and production capacity of the unit operating in the tariff area as per procedure specified which may be modified by the regulatory Collector in a manner that secures the duty-free goods from any pilfering/replacement during the sub-contracting process.

The duty and taxes involved on the outgoing goods from free zone for subcontracting in the Tariff Area shall be secured through post dated cheque and indemnity bond as set out in Appendix-V subject to drawl of the samples of both the outgoing and incoming goods.

The relevant securities shall be released after completion of the subcontracting activity. The period of subcontracting shall be determined by the Assistant or Deputy Collector of Customs, but such period shall not exceed three months, which shall be accounted for from the date of exit and entry of sub-contracted goods.

An officer not below the rank of Additional Collector may allow extension of time up to another three months subject to submission of revalidated security for the extended period, the FBR added.

Copyright Business Recorder, 2021