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ISLAMABAD: The Auditor General of Pakistan (AGP) has recommended to the Federal Board of Revenue (FBR) to revisit duty drawback rates to rationalise them in view of the decreasing customs duty rates on imports.

According to a new report of the AGP on drawback payments by the FBR, the FBR should ensure that customs duty drawback should not be more than the actual duty paid by the exporter.

The AGP report timely issuance of duty drawback has been ensured through Rule 222 of the Customs Rules, 2001, which provides timeframe for processing and payment of duty drawback.

Three field formations of customs processed duty drawback claims with delay ranging from 30 days to 2,614 days. It was also observed that 296,388 cases involving an amount of Rs25,825.96 million remained unprocessed without recording any reasons.

An analysis of duty drawback cases received during Audit, revealed that Model Customs Collectorate (MCC), Sialkot could process only 72 percent, MCC (A&F) Peshawar 50 percent and MCC, Allama Iqbal International Airport, Lahore 82 percent cases during the period under audit.

As per definition of duty drawback, it is the "repayment in whole or in part of the customs duties paid on the import of any goods".

It means that the duty drawback cannot be more than the duty paid at the import stage.

It is recommended that the rates of duty drawback may be revisited by the FBR in order to rationalise the rates of duty drawback in view of the decreasing duty rates, especially in the wake of Free Trade Agreements.

Further, the FBR may examine the issue in detail to ascertain the quantum of duty drawback paid in excess due to this discrepancy. It is also recommended that the duty drawback should not be more than the duty paid by the exporter.

The export to Afghanistan through land routes was removed from the definition of exported goods under rule 220(d) and (e) of Customs Rules, 2001.

Duty drawback to such exporters was therefore, not admissible.

Audit has observed that the payment of duty drawback by MCC Peshawar to exporters engaged in export to Afghanistan was Rs555.64 million.

Audit noted 2,328 cases, where duty drawback was paid in excess than due resulting in excess payment of Rs91.02 million.

In 872 cases, excess payment of Rs67.08 million was due to applying excess rates of duty drawback as notified in various SROs.

In 1,302 cases, export development surcharge was not deducted by the banks resulting in excess payment of duty drawback of Rs18.22 million.

Two field formations paid duty drawback of Rs5.72 million, in 154 cases, where foreign exchange was not or less received or bank credit advice issued after 07 July 2017, when the commercial bank was defunct.

Audit observed that an amount of Rs104.39 million was paid as duty drawback in time barred cases.

The delay in filing of claims ranged from nine days to 2,481 days.

Further, these claims were filed by the exporters without requesting the customs authorities for condonation of delay.

Duty drawback was paid to businesses, which were already availing facility of import under concessionary regimes such as Duty and Tax Remission for Exports, Manufacturing Bonds and Export Oriented Units without confirmation of procurement and utilisation of duty-paid materials in exported goods.

Since, no duty was paid by these units at import stage, therefore, payment of duty drawback was also not admissible to them.

Audit pointed out 65 such instances involving an amount of duty drawback of Rs149.91 million.

Audit observed that cases of duty drawback pertaining to years 2012 to 2018 were pending with the FBR.

Audit further observed that there was no mechanism in place to dispose of these cases on first in, first out basis.

In the absence of any criteria for selection of duty drawback cases for payment, cases are randomly processed, which is against the principle of equity.

Audit observed several significant internal control weaknesses. For instance, audit was not provided any proof of audit of duty drawback cases either by Directorate of Internal Audit or Directorate of Post Clearance Audit.

The amount of duty drawback was reported less by MCC, Peshawar and Sialkot to the FBR by Rs559.87 million in 12,262 cases.

Copyright Business Recorder, 2021