November 2, 2002	Saturday	Sha’aban 26,1423

ISLAMABAD, Nov 1: The Central Board of Revenue (CBR) has notified procedures for zero rated supply of locally manufactured goods to duty free shops.

The decision was taken following the request of Duty Free Shops Limited (DFSL) to work out procedure for the local supply to these shops, said a sales tax general order issued on Friday.

DFSL would apply to the respective collector of sales tax for grant of authorization for taking sales tax free delivery of the goods intended to be purchased from a specified registered manufacturer. Only such goods would be included in the application as DFSL intends to sell against duty free allowance under different baggage concessions.

At the time of filing the application, DFSL would furnish an indemnity bond in a proper form to the effect that in case goods intended to be purchased free of sales tax were used for the purpose other than the purpose of supplying the same against duty free allowance under different baggage concessions. DFSL would also pay the amount of sales tax involved in such goods, besides additional tax payable under section 34 of sales tax act.

On the basis of authorization given by the collector of sales tax after acceptance of indemnity bond furnished by DFSL, the manufacturer would deliver the goods against a zero rated invoice issued in the name of DFSL and quote the reference number and date of authorization issued by the collector. The zero-rated invoice should show the value of goods in Pakistani rupees as well as in US dollar. The goods should be delivered to DFSL only after affixing irremovable sticker containing a caution to the effect that it was meant exclusively for supply to and sale by DFSL under duty free allowances of the baggage concessions.

DFSL should pay price of goods in foreign currency, which would be surrendered by the manufacturer to the State Bank and manufacturer should receive the payment in Pakistani rupees as per the prevailing SBP’s procedures and foreign exchange regulations.

On receipt of goods, DFSL should issue a certificate of receipt indicating the reference number and date of the aforesaid authorization and serial number and date of zero-rated invoices.

DFSL should maintain proper separate records of the tax-free purchases and tax-free sales of goods purchased under this order. The manufacturer would be entitled to input tax adjustment in respect of goods supplied to DFSL against zero-rated invoices. And in case excess input tax credit was not available, the manufacturer should be entitled to refund of the input tax involved in such goods on the basis of following documents-input tax invoices/bills of entry; zero-rated invoices; authorization issued by the collector of sales tax; certificate of receipt issued by DFSL duty attested by customs; proof of surrendering to the SBP foreign exchange received from DFSL and proof of transportation of goods in case goods have been transported through commercial or third party means.

The indemnity bond furnished by DFSL would be released by the collector of sales tax only after satisfying himself either through audit or otherwise that goods have been sold by DFSL only against duty free allowance under the relevant baggage concessions.

DFSL would procure goods under this order to meet its requirements for a period not exceeding three months and should ensure that these goods did not find way in the local market. DFSL would be responsible to pay sales tax and additional tax in case any such goods were found being sold in the local market.