Working out APTTA insurance guarantees: FBR to exclude IT and WHT from overall duties

The Federal Board of Revenue has decided to exclude income tax and withholding tax from overall duties and taxes while working out amount of insurance guarantees to be secured in the form of financial security against the Afghan transit trade goods under the Afghanistan-Pakistan Transit Trade Agreement (APTTA).
Sources told Business Recorder here on Saturday that the extraordinary development in the operationalisation of the APTTA took place during a recent meeting between the FBR officials and Afghan importers at the FBR House Islamabad. Pakistani customs authorities have given this assurance to their Afghan counterpart to exclude income tax and withholding tax at the time of calculation of duties/taxes for deposit as insurance guarantee against the Afghan transit goods to be imported under the APTTA.
Thus, the Afghan importers would only pay customs duty, sales tax and federal excise duty (wherever applicable) as insurance guarantee ie customs security for clearance of transit goods under the APTTA. This is one of the major concessions to be granted to the Afghan importers under the APTTA.
In another major development, Pakistani customs authorities have also agreed to allow Afghan importers to deposit a fixed amount of cash with customs department instead of insurance guarantee, in the form of Customs Security. The Afghan side proposed that there should be an option for the Afghan regular importers to deposit a specific amount of cash with Customs instead of insurance guarantee, as a form of Customs Security, to cover the import levies of that particular importer. The FBR has agreed to incorporate it in the rules as an alternate form of Customs security for such importers.
The issue of Rule 619(2) of the APTTA came to the light during a latest meeting between Afghan customs officials and Pakistani customs authorities on the implementation of the new transit trade agreement at the FBR Headquarters. The Afghan side pointed out that amount of customs security should cover import levies only. The FBR informed that it is a national practice to secure the leviable duty and taxes. Pakistani customs authorities assured to look at the aspect of exclusion of income tax from the amount of the customs security.
Sources stated that there is no justification of including income tax and withholding tax in the overall amount of customs security during calculation of financial guarantees against the Afghan transit trade consignments. The direct taxes cannot be made part of the customs security and Afghan customs and importers have rightly pointed out about this issue. Keeping in view the genuine grievance raised by the Afghan side, the FBR is planning to exclude income tax and withholding tax from overall duties/taxes during calculation of insurance guarantees against Afghan transit consignments, sources added.