KARACHI: The Federal Board of Revenue (FBR) has initiated scrutiny of imports under SRO 492(I)/2009; following reports of gross misuse of tax exemptions, resulting in massive revenue loss to the exchequer.

The FBR has advised the chief collectors and collectors to submit a report regarding the misuse of the concessions.

“We have found significant revenue losses, as most of these goods imported duty-free under SRO 492(I)/2009 were never exported back and sold in the local market instead,” an official said. “These exemptions to several sectors may be restricted going forward.”

The SRO 492(I)/2021 provides exemption from the payment of duty and taxes on temporary imports. However, in terms of sub clause (iv) of the said SRO, the importer is statutorily bound to export such temporarily imported goods after due process within a period of 18 months of its importation.

Moreover, on the request of the importer, this 18-month period is extendable by the collector of Customs for further six months on the payment of 1 per cent surcharge/month on C&F value of goods for which the extension is sought.

Failure in exporting the equivalent quantity makes the importer liable to pay statutory rate of duty and taxes.

The paper and packaging industry had also approached the Federal Board of Revenue (FBR) last week, seeking cancellation of tax exemptions available for paper and its raw material imports under SRO 492(I)/2009.

Sharjeel Jamal of UTrade Logistics highlighted the loss of government revenue worth billions through the misuse of SRO 492(I)/2011 in connivance with the Customs authorities.

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI), in a letter to Finance Minister Shaukat Tarin, said that the All Pakistan Corrugated Cartons Manufacturers Association (APCCMA) had been facing a very serious issue regarding the misuse of SRO 492(I) 2009.

“As you are well-aware that [the] packaging sector is playing a vital role in the supply chain management cycle. A huge work force is employed in this sector directly and indirectly. This sector is exploited by the exporters who import raw materials and paper under the SRO 492(1) 2009 and they intentionally import excess material and sell this excess material in the local market at cheap rates, which creates difficulties for the packaging industry to run their business.”

“Therefore, you are requested to kindly instruct the department concerned to immediately cancel the import under SRO 492(1) 2009 of raw materials and paper in order to save the second largest sector of Pakistan or give permission to [the] packaging industry to import under SRO 492(I) 2009 to avoid any future crisis, which may lead to increases unemployment and closure of this sector,” the FPCCI added.