ISLAMABAD: The Federal Board of Revenue (FBR) has suffered revenue loss on account of the sale of goods by the duty free shops to incoming passengers in violation of the baggage rules.

This has been revealed in the report of the Auditor General of Pakistan (AGP) on the irregularities of the Federal Board of Revenue (FBR) for audit year 2021-22.

According to the audit report, loss of revenue has been witnessed due to inadmissible concession of duty and taxes by the duty-free shops. The practice of clearance of goods by the duty free shops on the basis of import trade price (ITP) fixed for the purpose of duty and taxes are contrary to law and causing continuous loss to the public exchequer.

According to SRO 682(I) 2006, the amounts given in table are meant for goods imported under the Baggage Rules 2006, by bonafide passengers only. The restrictions, conditions, allowances and facilities are provided in the Baggage Rules and Trade Policy in vogue. The Rule 3(c) of the Baggage Rules, 2006, issued vide SRO 666(I)/2006 allowed purchase for personal use from Duty Free Shop while availing allowance of value up to US$ 500 for personal use on visit after stay abroad of more than seven days. Further, Serial No VIII of Rule 3(B) of the said Rules excludes certain goods, i.e., microwave oven, cooking range, washing machines, TV, deep freezer, refrigerator, and air conditioner, which shall be allowed on payment of duty and taxes. Chapter-X of CGO 12/2002 provides the detailed procedure for sale of goods from duty free shops.

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Audit observed that within the jurisdiction of AC Customs (Duty Free Shop). AFU, Islamabad, two duty free shops sold “microwave ovens, washing machines, air conditioners, refrigerators” to passengers on payment of fixed amount of duty and taxes provided in SRO 682 (i) 2006.

The AGP is of the view that the goods mentioned under clause (viii) of the Rule 3B of the Baggage Rules, 2006 were not meant to be cleared from duty-free shops under ITP given in table SRO 682(I)/ 2006; rather the goods were required to be charged duty and taxes under section 25 of the Customs Act, 1969.

The practice of clearance of goods on the basis of ITP fixed for the purpose of duty and taxes is contrary to law and causing continuous loss to the public exchequer.

The lapse resulted in revenue loss of Rs 5,973,490. It is worth mentioning that the AGP has pointed out this irregularity time and again but no corrective action has been taken despite directions of the DAC. The department replied that matter was referred to FBR for clarification and decision of FBR on this issue would be complied with. DAC in its meeting directed the Collectorate to expedite assessment as per law without shuttling the issue to the FBR and report progress within 15 days. However, no further progress was reported till finalization of this report.

The AGP recommended early conclusion of the assessment and, in case of default, early recovery of the pointed out amount under intimation to audit, the report added.

Copyright Business Recorder, 2022