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Duty-free fabrics import to be stopped

ISLAMABAD (July 21 2005): The Central Board of Revenue (CBR) has decided to amend the ''Temporary Importation Scheme'' to stop duty-free import of fabrics/cloth under SRO 410(I)/2001.

As per decision, the tax officials would exclude fabrics/cloth from the list of importable items under this notification and restrict SRO 410 to import of accessories only. Recently, the import of fabrics has substantially increased under the temporary importation scheme.

Interestingly, duty-free import of accessories used in the manufacture of garments and textile made-ups from fabrics is allowed as per SRO 410. However, the plain reading of the notification shows that duty-free import of fabrics as a raw material is not permissible under the scheme. Moreover, ''fabrics'' is also not specified in Schedule I (Duty-free items temporarily imported) of the SRO 410.

Another condition of the notification is that exemption of duties and taxes is only available on import of goods as are capable of identification at the time of their re-exportation. The question is whether the fabrics imported under SRO 410 are identifiable at the time of export.

Official sources told Business Recorder on Wednesday that the collectors of customs would identify all importers of cloth under SRO 410 for physical verification of the stocks. In future, imports/clearance under the temporary importation scheme would be properly assessed to check any misuse of the facility.

They said that under-invoicing is causing an annual loss of over $2 billion. There are cases of under-invoicing of vehicles imported for diplomatic missions or imports under the ''temporary importation scheme''. According to CBR estimates, under-invoicing of items imported from China depict under-declaration of over $1 billion, which resulted in loss of over Rs 12 billion.

Officials said that the recent collectors conference discussed the issue of import of fabrics under SRO 410 and under-invoicing through ''temporary importation scheme/DTRE.

There has been increase in the volume of import of fabrics under the SRO 410 and DTRE following rationalisation of duty and correction of assessment of textile products in the 2005-06 budget.

The CBR has estimated collection of Rs 15-20 billion by controlling under-invoicing in just gone fiscal year.

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