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DTRE scheme: Starr data to be used for allowing tax-free import

ISLAMABAD (March 27 2004): The Central Board of Revenue (CBR) has decided to use exporters' information in the Sales Tax Automated Refund Repository (Starr) system to analyse their performance before allowing duty- and tax-free import of raw materials/inputs under the Duty and Tax Remission for Export (DTRE) scheme.

In this regard, the CBR has issued a directive to all collectors of customs on Friday clarifying various DTRE rules.

The issue came to limelight when collectors raised query that approval to import duties/taxes free raw material under DTRE does not require presentation of export record.

The CBR opined that the collectors could call for any additional record/information under section 26 of Customs Act, 1969 before granting DTRE approval. The data of sales tax refund available with Starr may be utilised to enlist the information about the export performance of the exporters under DTRE. Physical verification/inspection can also be carried out in doubtful cases.

The Collectorates must develop their respective data bank and exchange information regularly through Chief of Starr under intimation to Director (DSAO) and CBR, the CBR added.

The collectors objected that DTRE rules do require the applicant to produce export contracts as well as proforma invoices at the time of seeking permission to import inputs free of duties and taxes.

The CBR has directed collectors that the export contracts could be verified from the banks in suspected cases, under intimation to the concerned association. In cases involving export financing, only bank attested export contracts should be accepted.

The collectors raised another question that rules 297(2), 297(3) and 297(4) require the applicant to submit the complete security, against all the duty and tax remission to be availed along with the application for DTRE approval.

The CBR opined that furnishing of security documents in the Collectorates other than the Collectorate where DTRE approval has been issued is not allowed because the discharge of these documents is contingent upon the completion of DTRE audit and recovery of dues, if any, by the later Collectorate.

Moreover, Customs General Order 12 of 2002 prescribes a procedure for co-ordination/exchange of information between the clearing Collectorates and the approving Collectorates through DSAO.

Director (DSAO/IOCO) should keep regular watch that no security is discharged until all the DTRE-related formalities/obligations have been fulfilled by the DTRE concessionaire.

The provisions of rules will prevail over those of the general order.

The collectors objected that unlike Transshipment Rules, which require all goods for which transshipment permit has been issued to reach the customs port or station of destination within seven days of issue of transshipment permit there is no specific defined time limit within which the consignment after getting cleared under DTRE must reach the station of destination.

The CBR clarified that under rule 303, the DTRE-approved person is required to maintain detailed books and records relating to purchases, importations, stocks of goods, production, packing, sales, shipping and exportation, packing, sales, shipping and exportation of all goods for a period of 5 years after the export of finished goods.

Under the existing DTRE scheme, movement of inputs or outputs, as such, is not physically or otherwise controlled by the department. However, each DTRE-approved person is required to maintain records of receipts of goods from any source or dispatch/clearance of goods for any approved/prescribed purposes.

There is already a system in place whereby all data of imports and exports is transmitted by Pakistan Revenue Automation Limited (PRAL) to STARR/Sales Tax.

In this regard, the director input output coefficient organisation, Karachi should evolve a procedure whereby it is ensured that imports under DTRE are allowed clearance only upto authorised quantity to the DTRE-approved persons and all DTRE-related data is sent to the relevant Collectorate and CBR on weekly basis.

CBR will regularly watch and monitor the progress of DSAO/IOCO on this account.

The collectors raised a query that under rule 305 of DTRE scheme, the audit of the approval holder is to be conducted within 12 months after the end of utilisation period (which was 12 months from the date of approval but has been revised by the Board as 18 months from the date of procurement).

No mechanism/provision is available for conducting a surprise audit/check of those DTRE approvals, which are within their utilisation period.

The CBR directed the collectors that the surprise checking of the stocks of input goods and outputs may be done by the designated staff after permission from the Collector on need basis and audit should be undertaken only where serious discrepancies are detected.

The collectors questioned that under the existing DTRE rules there is no provision of regular checking/monitoring the operational status of the manufacturing unit approved under DTRE scheme.

The CBR has informed collectors that collectorates must assign the responsibility to the Assistant/Deputy Collector incharge HQ Intelligence Branch for checking the operational status of the DTRE applicant as when required at the time of granting DTRE approval or subsequently.

The CBR added that since several DTRE-related issues have been dealt with amicably under different rulings/clarifications issued from time to time and the present clarifications are being issued in view of peculiar events experienced from the forward-looking application of DTRE scheme, it is therefore, clarified that all instructions earlier issued on the issues covered in this letter, which may be manifestly or latently contrary to these instructions will be treated as cancelled to the extent of contradiction/ inconsistency, if any.

These instructions shall thus have an unconditional overriding effect but shall under no circumstances be construed as a shift in the overall declared CBR's policy of facilitating genuine DTRE exporters/ cases.

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