February 4, 2003	Tuesday	Zul Hijjah 2,1423

LAHORE, Feb 3: Full implementation of the Duty and Tax Remission on Exports (DTRE) scheme will leave no room for SRO 410 (allowing duty free import of inputs for export) or any SRO on duty drawback.

“Almost all flaws and anomalies in the DTRE scheme have been removed by a neutral body, the Export Promotion Bureau, in consultation with the exporters. If you feel that there still is any flaw in the scheme, your suggestions for its removal would be welcome. However, SRO 410 has to go,” Central Board of Revenue (CBR) chairman Riaz Malik told a large gathering of businessmen at the Lahore Chamber of Commerce and Industry (LCCI) here on Monday.

But, the chairman promised, no abrupt decision would be taken on the withdrawal of SRO 410. “We don’t want to disturb exporters nor do we wish to impede the smooth flow of exports. It is just a matter of time. But I cannot give you any timeframe as to how long the unannounced extension of SRO 410 would be allowed. The ball is now in the court of the commerce minister and the prime minister’s adviser on finance,” he said in response to a query.

However, he said, the users of the locally purchased polyester staple fibre (PSF) would continue to enjoy the facility of duty drawback (even after full enforcement of DTRE). “All such purchases would be deemed to be imported because of the sovereign guarantee given to ICI,” he added.

SRO 410 has not been allowed to lapse since June 2001 even after the introduction of the DTRE scheme because of certain flaws and anomalies in the new scheme devised to fully make exports zero rated and eliminate the “refund” culture.

The commerce minister had recently told businessmen here that SRO 410 would not be withdrawn unless all anomalies and flaws in the DTRE scheme were removed to the satisfaction of exporters.

The chairman said the CBR’s role was to facilitate timely, unhindered shipment of exports as well as to pay sales tax and duty drawback refunds to the exporters. He claimed that all major ports were now providing services to the exporters 24 hours a day. He said the country’s exports had gone up to $5.4 billion during the first six months of the current fiscal year compared to all time high of $4.9 billion in the same period. He was hopeful that exports would increase further in the second half of the year.

Malik claimed that the CBR had saved some Rs7 billion in the first 6-7 months of the current financial year by rationalizing over 300 SROs concerning duty drawback and by “denying several claimants that money which was not theirs”.

He insisted that the CBR was 100 per cent current on payment of duty drawback to the exporters with the exception of a few cases where there was some kind of dispute on the amount claimed. He categorically said those who had filed incorrect claims of duty drawback or sales tax refunds were raising a hue and cry and criticizing the CBR for the delay in payment.

He said the CBR had been paying something like Rs12-13 billion every year to the exporters on account of customs duty refunds in the last 6-7 years (excluding 2001-02) as exports stagnated around $8 billion. Last year, he said, the government had paid a hefty Rs26 billion or more to the exporters on account of duty drawback as exports rose to $9.2 billion. He said some would argue that depreciation in the value of the rupee against the dollar had caused this increase in the drawback amount. “But they tend to forget that maximum customs duty has been slashed to just 25 per cent from 75 per cent (including 10 per cent regulatory duty) during the same period.”

Similarly, he said, the CBR had paid Rs36 billion or so on account of sales tax refunds last year. “A major part of these refunds should never have been paid. Now we will pay (exporters) only what is payable (to them on account of sales tax and duty drawback refund). It is not my job to subsidise exports. My job is to ensure timely shipments and release of refunds to the exporters,” he asserted.

He said the CBR had already launched computerized system, START, for ensuring timely, correct payment of sales tax refunds. The computerization of the refunds, he said, would also eliminate the chances of embezzlement and facilitate genuine, honest exporters. “It (START) is a credible movement in the right direction,” he said.

He sought to dispel the impression that the CBR was delaying release of refunds to meet the revenue targets. “It is no more the case. Revenues are buoyant and on track. In 2-3 months the backlog of sales tax refunds would also be taken care of. In January this year alone, we paid Rs5.5 billion as sales tax refunds, which was about twice the amount paid earlier in a month.”

Malik rejected out of hand a proposal that the CBR should take a lenient approach towards the registered businesses and refrain from using data collected during the tax survey as long as sales tax was not imposed across the board throughout the country. “Survey is an ever continuing process. It is not a legitimate demand that the data collected during the survey should not be used. We need to put the survey effort in proper context and perspective. It doesn’t appeal to me that this chapter should be closed,” he said. He said very few businessmen had spoken the truth during the survey of their business turnover and most had demanded its suspension.