By Sajid Chaudhry
ISLAMABAD: Economic Coordination Committee (ECC) of the cabinet has decided to withdraw zero-rating of sales tax, rebate of central excise duty, repayment or drawback of customs duty and refund of the petroleum levy on exports of POL products to Afghanistan and Central Asian Republics, official sources said.
According to the summary approved in ECC meeting, Ministry of Petroleum and Natural Resources (MPNR) has proposed to ECC for withdrawal of all the tax and duty exemptions available on export of POL products to Afghanistan and CARs.
ECC not only approved placing ban on POL products exports to Afghanistan and CARs but also approved withdrawal of all tax and duty concessions available on such exports, the official sources explained.
In this regard, Ministry of Commerce will amend its Export Policy Order 2009 as well as Federal Board of Revenue (FBR) will amend it’s procedures notified for facilitating POL exports.
The text of the summary revealed that the existing Export Policy Order notified by the Ministry of Commerce allows duty, tax exemptions on export of all commodities produced or manufactured in Pakistan if exported in convertible currency.
Export Policy Order provides separate and exclusive Clause-7, for exports to Afghanistan and through Afghanistan to Central Asian Republics. In addition there is a provision especially with reference to exports meant for International Security Assistance Force (ISAF) and Defence Logistic Support Centre (DLSC) in Afghanistan.
It has always been the policy of MPNR to prioritise local demand of POL products and surplus, if any, allowed to be exported. It is hardly identifiable as to whether export quantities pertain to local refinery production or the imported product. However, the case for Jet Fuel is quite different, as it is supplied to International agencies in Afghanistan by Pakistan State Oil (PSO), Shell Petroleum Limited and other Oil Marketing Companies (OMCs) under commercial agreements, procured from local refineries and through imports.
Accordingly, MPNR has notified the oil industry including Refineries and OMCs to abstain from distributing petroleum products (exports) produced by the local refineries. If any of the OMCs want to export petroleum products to Afghanistan that shall only be made from imported volumes especially procured for export purposes under transit trade policy as amended from time to time by Ministry of Commerce and FBR.
There is possibility that export volumes meant for Afghanistan are being dumped and distributed in the local market due to price differential between local and export prices of the petroleum products leading to misuse of duty drawbacks and tax exemptions available vide clause-7(2) of the Export Policy Order. There are also chances of illegal exports, smuggling of petroleum products to Afghanistan. Therefore, there is a need to reconsider the issues involved in the export to Afghanistan as the Ministry of Petroleum and Natural Resources has to ensure that there is no shortage of petroleum products in the country and also to discourage dumping of products.
MPNR, therefore, recommended for the removal of duty, tax exemptions provided in the existing Export Policy Order with regard to export of petroleum products to Afghanistan including refund of Petroleum Development Levy and GST etc unless there is a Government to Government contract but will be done through Oil Marketing Companies only. However, export of surplus JP8 declared, decided in the Product Review meeting will be allowed to be exported by the Refineries or Oil Marketing Companies. If any of the Oil marketing Company wants to export JP-8 to Afghanistan that shall only be made from imported volumes especially procured for export purposes, through foreign exchange remittance from the buyer. Ministry of Commerce and FBR may amend the policy accordingly.
The summary was circulated to Ministries of Commerce, Finance, Planning and Development Division, OGRA and FBR. The stakeholders had endorsed the proposal on withdrawal of tax and duty exemption available on export of POL products to Afghanistan and CARs.
Section 7 of the Export Policy Order 2009 relates to Exports to Afghanistan and through Afghanistan to Central Asian Republics. The text of sub-section 2 of the section 7 of the exports policy order reads as Follow: Exports in convertible currency. Subject to the provisions of sub-paragraph (1) of paragraph 4 and Schedule III, all items and commodities produced or manufactured in Pakistan, exported via land route or by air against irrevocable letters of credit, confirmed orders on realization of export proceeds through banking channel or advance payment, in convertible foreign currency, shall be allowed:- (i) zero-rating of sales tax on taxable goods, (ii) rebate of central excise duty and (iii) repayment or drawback of customs-duty, subject to the following conditions, namely:- (a) the proof that goods exported from Pakistan have reached Afghanistan will be verified on the basis of copy of import clearance documents by Afghan Customs Authorities across the border: Provided that this condition shall not apply to exports made to International Security Assistance Force (ISAF) and Defence Logistic Support Centre (DLSC) in Afghanistan. To claim the facility of zero rating of sales tax or duty drawbacks as well as federal excise duty refund against goods exported to ISAF and DLSC, the customs authorities will allow refunds on the basis of receipts issued by the Afghan offices of these agencies confirming that they have received the goods. The receipt will be reconfirmed by the representatives of these agencies in Pakistan.
Further details of the policy on exports to Afghanistan and CARs also include, packages or retail packing shall be prominently and indelibly be marked with the expression “For Export Only”, and in case of international donor agencies “For Export only – supply for aid to Afghanistan (insignia of the organization) – not for sale in Pakistan”; (c) export shall be allowed only through authorized export land routes i.e. Torkham, Chaman, Ghulam Khan (for export of cement only) and Qamar Uddin Karez (when it becomes operational); (d) export from Export Processing Zones, manufacturing bonds and Export Oriented Units, except vegetable ghee and cooking oil, shall be allowed but these exports shall not be entitled to (i) zero-rating of sales tax on taxable goods, (ii) rebate of central excise duty; and (iii) repayment or drawback of customs duty:
Provided that export made to International Security Assistance Force (ISAF) and Defence Energy Support Centre (DESC) may be made on deferred payment basis, without opening of Letter of Credit, subject to the following conditions, namely: (i) the waiver shall be applicable strictly to exports made to ISAF and DESC; (ii) shipments to ISAF and DESC are made by their authorized agents duly endorsed by the ISAF and DESC receiving agent in Afghanistan; and (iii) payment of foreign exchange is received within sixty days of shipmen;. (e) zero rating of sales tax or duty drawbacks as well as federal excise duty refund against goods exported to ISAF and Defence Logistics Agency, may be allowed on production of receipts issued by the aforementioned agencies confirming that they have received the goods. The receipts will be reconfirmed by the representatives of these agencies located in Pakistan.