KARACHI, Jan 18: A major flaw has surfaced in the Duty and Tax Remission for Export (DTRE) rules as the system does not have a provision of duty drawback cover for exporters on their local purchases.

“Undoubtedly I have to agree that the DTRE rules which have been basically framed to eliminate duty drawback system from the entire export trade have a flaw wherein it does not give cover to locally purchased input by an exporter,” Member Export, CBR, Mumtaz Haider Rizvi admitted.

The occasion was a workshop on “DTRE Rules” organized by the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) on Friday evening in a local hotel.

Flanked by his entire team of CBR officials related with DTRE rules, the member export withdrew from his earlier position that the DTRE system is flawless and should be immediately adopted by exporters in order to have a hassle free system.

The PRGMEA members patiently listening to the sermons of Mumtaz Haider Rizvi delivered on the DTRE rules. He insisted that the amended rules have been made so to ensure that all their past fears and apprehensions are removed and now they have become flawless.

At one stage, the member export went to the extent of advising the participants to immediately adopt and get registered under DTRE rules as it will prove to be a heaven for exporters.

“All care has been taken to include any suggestion and remove any objection raised by the business community in the amended rules but I must say that most of you seem to have not even bothered to read the document where as many as 19 new changes have been made,” insisted the member export.

Rizvi even alleged that exporters are reluctant to part ways with previous system of duty drawback governed under SRO 410, despite the fact that they have to suffer a lot for getting their duty drawback claims.

However, the situation suddenly took a turn when members of the PRGMEA started pointing out the flaws and shortcomings in the rules to which the member export tried his best to satisfy the participants and defend the amended rules.

Ultimately the situation came to a standstill when former chairman PRGMEA Masood Naqi drew the attention of the member CBR towards the input adjustment on local purchases and supplies needed by an exporter against his export consignments.

Having left with no answer, Mumtaz Haider Rizvi, after accepting the flaw in the amended DTRE rules, tried to pacify the situation by throwing an idea that claims against local purchases and supplies could be given from Export Development Fund (EDF).

Nevertheless, the PRGMEA members immediately objected to the idea and said that the EDF money belongs to exporters and that it was not revenue money which could be distributed and the government should make arrangements from its own sources.

The member export, rejecting the objection, said that in any case there is no question of paying duty drawback under the DTRE rules which are basically there to abolish duty drawback payment system at any stage.

He again insisted upon the exporters to immediately adopt the system as it is only way out for getting out of WTO regime to be implemented by 2005.

In any case, he said, there is no question of allowing duty drawback in future and sooner or later they have to come under the DTRE rules and accept a system where there is no duty no drawback.

However, he agreed to review the DTRE rules once again to remove the flaws and sought further suggestions from the PRGMEA members and other trade bodies.

He was highly critical about huge losses to the national exchequer on account of bogus claims against sales tax refunds as well as duty drawback payments. The economy could no longer sustain such payments where last year a huge amount of Rs27 billion were paid against duty drawback and Rs36 billion against sales tax refunds, he added.

There could be a possibility to making DTRE rules better, he said but there is no room to evade or reject them all together particularly when a lot of time have been already wasted.

Earlier, chairman PRGMEA Zubair Parekh in address of welcome also highlighted some the problems and deficiencies in the DTRE rules and suggested for their removal if the government is keen to see that exporters shift to the new system.