FBR Lays Conditions for Sales Tax Zero-rating on Import of Polyethylene/polypropylene

ISLAMABAD (September 20 2009): The Federal Board of Revenue (FBR) has laid down certain conditions for sales tax zero-rating on import and supply of polyethylene and polypropylene for manufacture of mono filament yarn and net cloth.

The FBR has suppressed SRO 769(I)/2009 through a notification issued here on Saturday.

According to the notification, the FBR has zero-rated the import and supply of polyethylene and polypropylene falling under Pakistan Customs Tariff (PCT) heading No 3901.1000, 3901.2000 and 3902.1000 for manufacture of mono filament yarn and net cloth. This is subject to the condition that the manufacturer is duly registered and has in-house manufacturing facility and supplies net cloth to green house farming at zero-rate. The following conditions, restrictions, limitations and procedure have to be followed to avail zero-rating facility.

First, a sales tax registered importer-cum-manufacturer having suitable in-house facilities shall submit a complete requirement in the prescribed format appended as Form-I of his annual consumption of permissible items (inputs) he is entitled to import for the manufacture of mono filament yarn and net cloth, to the Collector of Sales Tax and Federal Excise having jurisdiction or to any other organisation or person as authorised by the FBR.

Second, the importer-cum-manufacturer shall file a request containing a declaration of input/output ratios to the Collector of Sales Tax and Federal Excise or the authorised person. The Collector or the authorised person may accept the declaration of input output ratio as declared by the applicant and determine the annual requirement of inputs.

In case the Collector or authorised person is not satisfied with declared input output ratios of the items to be manufactured because of their being prima facie not in accordance with the prevalent average of the relevant industry or for any other reason, he may, after allowing a reasonable provisional quantity, make a reference to the Engineering Development Board or IOCO or to any other recognised authority for final determination thereof.

The collector or authorised person shall then determine the final annual quantitative entitlement of inputs and the applicant shall proceed to consume imported inputs in accordance with the input output ratios and quantities so determined. Third, the clearance of inputs shall be allowed through one port or dry port only and maintenance of centralised record of quota debiting at the port for which the Provisional or Final Certificate is issued shall be maintained.

Fourth, the authorised officer of Sales Tax Collectorate shall furnish all relevant information online to Customs Computerised System (PACCS) as per Form-II appended to this notification against a specific user ID and password obtained under section 155D of the Customs Act, 1969. In already computerised Collectorate/Customs stations where the PACCS is not yet operational, the Project Director or any other authorised person shall feed the requisite information in the PACCS on daily basis and on weekly basis of the data obtained from the stations which have not yet been computerised.

Moreover, the importer-cum-manufacturer shall file Goods Declaration in the prescribed format and manner with complete details of authorisation of imported inputs for clearance. The Collector of Customs on satisfaction of correct declaration shall allow clearance of imported inputs after obtaining post dated cheque for the differential amount of statutory tax and concessionary taxes.

The importer-cum-manufacturer shall maintain records of the inputs and the goods manufactured from imported inputs in such form as may be prescribed by the Federal Board of Revenue or required under any other law for the time being in force. The importer-cum-manufacturer shall communicate to the concerned Collector of Sales Tax and Collector of Customs in writing about the consumption of imported items within 60 days of consumption of goods.

The post-dated cheque shall be released or cancelled on receipt of written confirmation regarding consumption of goods by the importer-cum-manufacturer. In case of non-consumption within one year from the date of import, the importer shall pay the sales tax involved or obtain extension from the Collector of Sales Tax and Federal Excise under intimation to Collector of Customs giving plausible reasons for a reasonable period not exceeding 90 days.

The notification further said that the Collector of customs may, on its own or through the Collector of Sales Tax and Federal Excise or through any other department working under Revenue Division, whenever deemed necessary get the records of the importer-cum-manufacturer audited and may also get the stocks verified.

In case it is found that the inputs have not been properly accounted for or consumed for the manufacture and supply of goods as prescribed, the Collector may initiate proceedings for the recovery of leviable sales tax besides penal action under the relevant provisions of the Sales Tax Act, 1990. In case of clearance through Pakistan Customs Computerised System (PACCS), the said information shall be furnished on line against a specific user I D and password obtained under section 155D of the Customs Act, 1969, the procedure added.

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