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Taxation
The government is considering amending the Duty and Tax Remission for Exports rules to increase exports to Afghanistan taking into account proposals of multinational companies. In this regard, leading exporters have approached the Economic Advisory Council (EAC) with the aim to amending the DTRE scheme to facilitate exports to Afghanistan.

Tax experts told Business Recorder here on Tuesday that there is an option available under rule 298 of Custom Rules, 2001 that a direct exporter may obtain advance DTRE approval from concerned custom authorities for next 12 months based on his past export performance of 24 months. This incentive should also be provided under rule 307 of Custom rules, 2001 as well to benefit Afghanistan exporting companies, who have good track record of exports, to fully utilise this facility. The current restriction of approval on the basis of availability of advance payment or irrevocable LC in case of export to Afghanistan need to be eliminated for all export oriented sectors/FMCG sectors/well-reputed exporters to bring uniformity in DTRE rules. Realisation of export proceeds should become part of verification stage i.e. audit instead of pre-approvals stage, as it is time-consuming exercise to get approvals from customs authorities each time upon receipt of monthly advance. It is to be noted here that LC option is totally not workable due to weak foreclosure laws in Afghanistan, they suggested.

One of the leading exporters has given a proposal to increase the exports of Pakistan to Afghanistan. They have pointed out that DTRE facility which was introduced in 2001 vide SRO No. 450(1)2001 has been very helpful for different export oriented sectors; however, this has not been friendly for exports to Afghanistan.

To enhance the exports to Afghanistan a recommendation has been given for making amendment in DTRE scheme.

A top company informed the EAC that in the prevailing economic scenario lead by balance of payment crisis, it is utmost important for our country to enhance exports in order to curb declining foreign exchange reserves which is also the topmost agenda of the new Government. The company would like to highlight here that Government of Pakistan has been kind with local manufacturers by facilitating them to encourage exports through various incentives such as Duty draw back, Duty & Tax remission for exports (DTRE) and Export processing Zones.

Based on the data published by State Bank of Pakistan, Pakistan’s total exports to Afghanistan amount to US$ 1.1billion in FY 17 which has declined from US$ 1.7billion in FY 15. The decrease in bilateral trade is mainly attributable to disturbing political ties, imposition of customs duties, stringent controls over trade with Afghanistan and increasing cost of doing business in Pakistan.

DTRE facility was introduced vide SRO 450(I)/2001 dated 18 June 2001 by making addition of Chapter VIII in Custom Rules, 2001. This facility has been helpful for different export oriented sectors since its inception, however, it has not been friendly for exports to Afghanistan due to some stringent provisions.

It has been highlighted some barriers in exploiting the full potential of the scheme, which are applicable on exports to Afghanistan: As per rule 307 of Custom Rules, 2001, in case of exports to Afghanistan, benefit of DTRE facility is conditional on advance payment or irrevocable letter of credit (i.e). We would like to reproduce below the relevant extract of the said rule for your reference:

“In case of exports to Afghanistan and through Afghanistan to Central Asian Republics by land routes, the facility of this, sub-chapter shall be admissible only against established irrevocable letters of credit (LG) or receipt of advance payment in convertible foreign currency from the country of import.” Owing to the weak foreclosure laws in Afghanistan it is very expensive for importers in Afghanistan to provide irrevocable LC, as it requires 100 percent cash margin to be kept at the bank. Further, importers in Afghanistan are also reluctant to provide advance stretching over a month for their imports, which becomes a mandatory requirement because of the operational inefficiencies inherent in the DTRE scheme. Approvals from Customs authorities, which are required on monthly basis after receipt of advance/LC from Afghanistan takes almost 10-15 days due to lack of automation resulting in delay in production and timely exports, company added.
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Taxation
On a writ petition filed by a taxpayer, the Lahore High Court has directed the Tax Department to decide the application of the taxpayer before the expiry of deadline of January 31, 2019 for filing of revised return under the section 214E for closure of audit.

When contacted, Shahid Jami, tax consultant, explained the background of the case. The return of total income filed by the petitioner company for the Tax Year 2016 was late and accordingly, audit proceedings under section 214D were initiated. These audit proceedings were pending when through Finance Supplementary (Amendment) Act, 2018 section 214E was inserted providing 25percent further tax over and above the tax chargeable as per return of total income filed for closure of audit.

Whereas, in the case of petitioner company, the tax chargeable as per original return was Rs50,326,584; however tax payment/deductions at source were of Rs94,838,673 and accordingly the refundable amount of income tax was Rs44,512,089. The taxpayer filed application for revision of return by stating that twenty-five percent additional amount of tax be adjusted out of refundable amount.

However, contrary to the provision of adjustment of tax, the in-built calculation on the e-portal does not allow said adjustment rather keeps the refund amount intact and requires separate payment of twenty-five percent tax. The petitioner company filed another application with the Commissioner pointing out the anomaly in the e-portal with the request to amend the software as per legal provision. However, there was no response and last date of filing of revised return was approaching and therefore the petitioner company filed a writ petition.

In the petition, it was explained that as per section 168(1)(b), the amount of tax collected or deducted shall be treated as tax paid by the person from whom the tax was collected or deducted. As per section 168(2), the person shall be allowed credit for the tax in computing the tax due by the person on the taxable income of the person for the tax year in which tax was collected or deducted. Whereas, as per section 168(4), a tax credit allowed under this section shall be applied in accordance with section 4(3).

As per section 168(5), a tax credit allowed under this section for the tax year that is not able to be credited under section 4(3) for the year shall be refunded to the taxpayer in accordance with section 170. Whereas, as per section 170(3) where the Commissioner is satisfied that the tax has been overpaid, the Commissioner shall apply the excess in reduction of any other tax due, from the taxpayer under this Ordinance.

The LHC has disposed of the writ petition with the direction to the department to decide the application of the petitioner regarding anomaly in the software, well within the deadline of filing of revised returns for closure of audit.

Jami pointed out that this issue is involved in hundreds of cases and FBR has deliberately not provided the adjustment in the revised return which is otherwise available for the original return and this is purely a revenue driven approach contrary to the expressed provisions of section 170(3) regarding adjustment of refund towards any tax due under the Ordinance. He urged that the FBR should amend the software at the earliest and also extend the last date of filing of revised returns so that the taxpayers across the country could benefit from the legislative intent of closure of audit.
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Taxation
Pakistan Customs, being the member of World Customs Organisation (WCO), celebrated International Customs Day, on January 26. WCO slogan for the year is “Smart Border Swift and smooth Cross-Border movement of goods, People and means of Transport”. The celebrations of International Customs Day began at the Custom House Quetta with the hoisting of flag followed by parade, thereafter a function was held at the premises of the office. Wherein, speeches of the distinguished officers were held.

The chief guest of the celebrations was Dr Zulfiqar Ali Chudhry, Chief Collector (Enforcement) Quetta Customs, who distributed certificates of appreciation to the officers/officials. He also distributed shields and certificate among the top import and export and clearing agents.

Chief Collector during his speech well come both Quetta and Chaman chambers and the notable. He assured them to solve their issue on priority basis. He cleared them tat the government brought new changes in Quetta Collectorate and post chief collector post which once was posted at Karachi in order to meet and solve the issue of the Customs staff and business community on priority and urgent basis.

He stated that “Customs Day celebration give us message that economically zone or borders are the sole of economic stability.” He offered full support to solve the chronic of promotion of MCC Quetta Staff issue. Ashraf Ali Collector of Customs, in his opening remarks, welcomed the participants and briefly explained the concept of “SMART Borders for seamless trade travel and transport”.

He stated that MCC Quetta had taken many measures to work towards achieving SMART borders. Despite considerable emphasis by higher authorities, Customs could not launch the Web-Based One-Customs WeBOC System at Chaman. He stated that customs plays vital role in the economic development of the country.-PR
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Taxation
The customs department will begin collecting at least 22 to 30 percent duty/taxes on the imports of mobile devices as the PTA plans only compliant mobile devices business in the country. Pakistan Telecommunication Authority (PTA) with the approval of the federal cabinet launched the Devices Identification, Registration and Blocking System (DIRBS) to ensure the sale, purchase and provision of mobile communication services to compliant mobile devices only.

Consequently, all type approval holders /authorized distributors/ original equipment manufacturer (OEM)/ original design manufacturer (ODM) and mobile network operators (MNOs) are required to ensure that non-compliant devices are not imported, sold, marketed or connected with the network of mobile operators. The devices with SIM/IMEI functionality which are type approved or having certification of compliance (CoC) to technical standards to IMEI devices issued by the PTA are the compliant mobile devices.

At present, mobile devices are brought into the country either through commercial imports and imported by individuals in accompanied baggage/ courier or brought in illegally by through smuggling. However, only the commercial imports of mobile devices are regulated.

The customs department has now formulated procedures and issued tariffs to allow import of mobile devices brought in by individuals for their personal use in accompanied baggage or through couriers or mobile devices brought in through informal channels and available in the local market.

According to Pakistan Customs Tariff (PCT) 8517.1219, which will be applicable by mid of February, the customs department will collect Rs 250 customs/regulatory duty (RD) per cell phones, having value up to US$ 60, which is 3 percent of the total value.

Similarly, 10 percent RD will be charged on the cell phones having value above US$60 up to US$130 and 20 percent duty on above US$130 value. The sales tax amounting Rs 650 will be collected for low and medium price cell phone and Rs 1500 on smart or satellite phones besides 3 percent advance sales tax.

The customs department will also charge 6 percent advance income tax from filers and 9 percent from non-filers against the mobile devices brought into the country either through commercial imports or imported by individuals. The mobile handset levy will also be collected under three different tariff slabs: Rs 1000 per set will be charged where value, including duty/taxes of cell phones is Rs 10000 to 40,000, Rs 3000/set for the cell phones valuing over Rs 40000 to Rs 80000, inclusive of all taxes. Rupees 5000/set will be paid on the import of cell phone having value, including duty/taxes exceeds Rs 80000.

Replying to a question, customs officials said that traveller is allowed to bring one mobile phone without payment of duty and taxes provided his/her stay abroad was more than seven days and this benefit would only be admissible once during the year. Duty and taxes would be charged in case of more than one mobile phone.

He further said that counter had been established at airport for registration of cell phones where customs department would also collect applicable duty and taxes. Traveller may also approach the nearest customs office for registration of mobile devices within 15 days of the arrival date.
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