The office responsible for handling drawback facility is finding it exceedingly difficult to function legally due to the absence of relevant rules regarding tax refund, officials said.
With the implementation of the new VAT law from July 01, the key task of the Duty Exemption and Drawback Office (DEDO) has been vested with field-level VAT offices. The Drawback Office used to refund Value Added Tax (VAT) to the export-oriented sectors.
Officials said currently the Office is not authorised to refund either VAT or customs duty as its power to determine 'input-output coefficient' was delegated through a Statutory Regulatory Order (SRO) under the VAT Act-1991.
Input-output coefficient is a process through which the office verifies whether an exporter used the raw materials imported duty-free for production purpose.
With the scrapping of the VAT Act-1991, the entity has lost its main task to refund VAT to the exporters that constituted the major share of drawback.
After selling products and services overseas, export-oriented sectors are entitled to get drawback of their paid VAT, customs duty (except advance income tax) on the raw materials that they used on producing the product or delivering services.
Officials at the Drawback Office said they will only be able to start refunding the customs duty to the exporters after the National Board of Revenue (NBR) empowered it issuing a relevant rule.
Officials said while the agency was empowered to determine whether an exporter was eligible for refund, it could not work out the process now due to the absence of rules.
Raising the issue, director general of the Office Md Masuk Al Hussain has recently sent a letter to the NBR.
Although the customs act has a provision for this, the agency cannot function legally unless the VAT wing issues rules.
Talking to the FE, Mr Hussain said a rule is needed to make his Office functional and empower it for refunding customs duty.
"Some of the exporters, including from the leather sector, asked for details of refund process. We couldn't respond because we have no rules," he added.
Some of the exporters under the bond facility have submitted application to the agency for determining input-output coefficient.
According to the '100 per cent Export Oriented Industries, (temporary import) Rules, 1993', the Office was authorised to refund VAT and customs duty by determining input-output co-efficient of exporters.
Under the customs act, 1969, section 219, and VAT act-1991, section 66 and 72, all exporters enjoying bond facility were required to collect 'input-output coefficient' from the DEDO before applying for Utilisation Permission (UP).
Customs Bond Commissionarate also used to determine the import entitlements of the exporters on the basis of the coefficient issued by the DEDO.
"From July 01, 2019, the exporters under bond facility need to know, under which law, in what method and from which entities they will obtain the coefficient," the letter said.
The agency was established in 1987 to offer drawback facilities of paid VAT and customs duty on the imported raw materials of exporters.
To determine the input-output coefficient, there are two sector specialists--chemical and electrical and a cost accountant at the DEDO.
The entity issues drawback to some 20 export-oriented sectors such as leather, knitwear, power, jute, urea fertiliser, fuel, wood (processing), power, lamp shade, mild steel products, power transformers, gas, plastic products, insulator and specialised textiles etc.
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