ISLAMABAD/KARACHI: The Federal Board of Revenue (FBR) has allowed exporters to make domestic sales up to 20 percent of the goods manufactured from duties and taxes free input/raw materials imported under Export Facilitation Scheme 2021.
The FBR has issued an SRO 957(I) 2021 here, on Monday, to notify the new “Export Facilitation Scheme 2021”.
The new scheme will run parallel with existing schemes such as Manufacturing Bond, DTRE and Export Oriented Schemes for two years.
The existing old schemes shall be phased out in the next two years and will be fully replaced by Export Facilitation Scheme-2021.
The EFS 2021 Rules can be accessed at the official website of the FBR.
The FBR has notified Rules for new Export Facilitation Scheme 2021, which will be effective from August 14, 2021.
The FBR has repeatedly amended the new scheme to incorporate suggestions of exporters and finally issued the updated procedure to facilitate all categories of exporters.
During the last two months, the exporters had raised many concerns over the proposed scheme, which appeared to be addressed in the final scheme including reduction in percentage of domestic sales from 30 percent to 20 percent.
The powers, functions and role of the Input Output Coefficient Organisation (IOCO) under the new scheme has also been revised.
Now, the IOCO after determining the input and output ratios and production capacity of the exporter will issue an “Analysis certificate” showing quantities of input goods required for the manufacture of the one unit of output goods and the ratio of wastages.
The IOCO Director shall upload the value of input.
It is expected that the Export Facilitation Scheme 2021 will reduce cost of doing business and cost of tax compliance, improve ease of doing business, reduce liquidity problems of exporters by eliminating sales tax refunds and duty drawback for the users of scheme and shall attract more users and shall ultimately promote exports.
Users of this scheme will include Exporters (Manufacturers cum Exporters, Commercial Exporters, Indirect Exporters), Common Export Houses, Vendors and International Toll Manufacturers.
Users of this Scheme shall be subject to authorisation of inputs by the Collector of Customs and Director General IOCO.
Inputs include all goods (imported or procured local) for manufacture of goods to be exported.
These include raw materials, spare parts, components, equipment, plant and machinery.
No duty and taxes shall be levied on inputs imported by the authorised users and local supplies of inputs to the authorized users shall be zero rated. Through this new scheme Common Export House will import inputs duty and tax free for subsequent sale to the authorised users especially SMEs.
This scheme has also allowed international toll manufacturing within Pakistan.
Under the said scheme, minimum but necessary documentation and securities based on category and profile of the applicant, user or exporter will be required.
This scheme will encourage new entrants and SMEs.
This scheme will be completely automated under WeBOC and PSW where users of the scheme and regulators (IOCO, Regulator Collector, PCA etc.) shall be integrated through WeBOC and PSW and communicate through these systems.
The focus of the scheme is on post clearance compliance checks and audits. Under this new scheme, authorisation and utilisation period has been enhanced from two years to five years.
Under the new scheme, the user shall be allowed to sell up to 20 percent of the output goods manufactured from input goods in the domestic market on payment of leviable duty and taxes on filing of a Goods Declaration, which shall be assessed as if goods are imported into Pakistan in that condition, subject to satisfaction of the Regulatory Collector regarding reasons for domestic sale.
In case the user is unable to export the output goods and desires to sale output goods exceeding the percentage given in the domestic market, he may sell them in the domestic market subject to payment of duty and taxes on filing of goods declaration, which shall be assessed, if goods are imported in Pakistan in that condition and subject to the satisfaction of the Regulatory Collector.
In addition, surcharge at the rate of KIBOR plus three percent per annum shall also be charged on the value of input goods used in the output goods being sold in the domestic market, the FBR stated.
The new scheme would be available to the following persons subject to authorisation of import, warehouse and purchase of input goods under these rules and registration in the WeBOC or PSW: persons registered under the Sales Tax Act, 1990, as manufacturer-cum-exporter, who make value addition in the manufacture and export of goods, which shall not be less than 10 percent; manufacturers who act or intend to act as contracted vendors of foreign principal as toll manufacturers; commercial exporters; ;persons registered under the Sales Tax Act, 1990, as manufacturer and operating as indirect exporters; manufacturers including manufacturers of engineering goods who intend to supply against international tenders and Common Export House.
The application for authorisation to operate under this scheme shall be submitted online to the Regulatory Collector.
The WeBOC or PSW system shall assign a unique identification number to each application for authorisation.
In the case of goods other than same-state goods, the input- output ratios and wastages shall be declared by the applicant in the application.
As per scheme, the acquisition of input goods without payment of duty and taxes under these rules shall be granted based on export performance for last two financial years; and firm contract of export.
The applicant can apply for authorisation based on both performance and contract basis simultaneously.
An applicant having multiple contracts of export may apply for consolidated approval for all such contracts.
For Categorization of exporters, the FBR said the exporters shall be treated as per the following categories:
(i) Category A: Manufacturers-cum-exporters with 60 percent or above exports of their total annual production in last two years
(ii) Category B: Manufacturers-cum-exporters with less than 60 percent total annual production being exported, this category shall be further subcategorized as under: Category B-l: Manufacturers-cum-exporters having more than 3 years of export history. Category B-2: Manufacturers-cum-exporters having less than 3 years export history
(iii) Category C: Indirect exporter, commercial exporters and international toll manufacturers
Category C-l: Manufacturers having more than 3 years history of supplying to direct exporters or export as commercial exporter or international toll manufacturing;
Category C-2: Manufacturers having less than 3 years history of supplying to direct exporters or export as commercial exporter or international toll manufacturing. All existing users of any of export schemes issued under SR0 450(1)2001, dated 18.06.2001, Chapter XV, DTRE, SR0 327(1)2008, dated 29.03.2008, before issuance of these rules shall be eligible to be classified under the respective category, as the case may be, provided they have a good compliance record, the FBR added.
The EFS 2021 was approved by the federal government in June and passed by the parliament under the Finance Act 2021.
Similarly, the Common Export Houses will import inputs duty and tax-free and supply the same duty and tax-free to the Users (Exporters especially SMEs) authorized under these rules.
This scheme focuses on post-clearance compliance checks and audits and the authorization and utilization periods under the scheme enhanced from two years to 5 years.
The government hoped that the new EFS 2021 shall reduce the cost of doing business and cost of tax compliance, improve ease of doing business, reduce liquidity problems of exporters by eliminating sales tax refunds and duty drawback for the users of the scheme and shall attract more users and shall ultimately promote exports.
Copyright Business Recorder, 2021