Exporters might face trouble in getting duty draw back as the Duty Exemption and Drawback Office of the National Board of Revenue lost its legal ground to carry out required activities for refunding duty following implementation of the new VAT law.
DEDO has lost the power to determine input-output coefficient required for determining the refundable duty exporters paid on import of raw materials with the implementation of the new Value-Added Tax and Supplementary Duty Act-2012 from July 1, 2019.
Input-output coefficient determines quantity of raw materials including depreciation required for production of a single unit of a product.
DEDO gives refund of duty and VAT crosschecking whether the exporter had properly used the raw materials in their products and export those products.
Coefficient was also required for exporters with bonded warehouse facilities for getting import entitlement from customs bond commissionerates.
Officials said that the DEDO would determine coefficient and subsequently refund of customs duty and value added tax under the rules titled ‘Complete Export-oriented Industries (Temporary Importation) Rules 1993 that was issued under the old VAT Act 1991 and the Customs Act 1969.
DEDO would not now be able to determine the coefficient as the VAT Act 1991 became ineffective with implementation of the new VAT law, they said.
NBR also did not keep any provision related to duty draw back in the new VAT law, they said.
The new VAT law also empowered the field-level VAT offices for refunding VAT to export-oriented industries, they said.
DEDO was responsible only for refunding import duty, known as duty drawback, which also become uncertain due to absence of required rules, they added.
‘NBR should issue specific rules for DEDO enabling the entity to determine coefficient and give duty drawback,’ a senior official said.
He said that DEDO had already requested the revenue board for issuing the rules as soon as possible as many exporters had requested the office to determine coefficient for their export products.
On the other hand, some other companies also wanted to know on how and from which NBR office they would get coefficient, he added.
Exporters with bonded warehouse licences require to receive coefficient from DEDO before applying to customs bond commissionerates for utilisation permission.
Customs bond commissionarates also use the coefficient to determine the import entitlements of the exporters.
He said that a rule would be required to make the DEDO functional and empower it for providing duty drawback.
DEDO director general Md Masuk Al Hussain on July 3 sent a letter to NBR requesting issuance of directives or rules over the issue.
DEDO usually gives refund on export of a number of goods including knitwear, specialised textile, jute goods, plastic goods, shopping bag, fuel, processed woods, insulator, leather, surgical goods, power transformer, metal zipper, MS products and urea.
It also provides refund of taxes on utility bills like electricity and gas.
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