ISLAMABAD, Jan 1: The tax authorities have recommended to the commerce ministry not to extend the temporary importation scheme as it was what they believed the main hurdle to implementation of no-duty-no-drawback scheme introduced three years back.

Official sources told Dawn on Thursday that the Central Board of Revenue (CBR) had made the recommendation after becoming to know that the commerce ministry intended to extend the facility for yet another period at the persistent demand of certain importers.

The government had introduced the Duty and Tax Remission for Export (DTRE) scheme in the year 2001 as part of Asian Development Bank's (ADB) conditionality not to extend any temporary importation scheme.

However, the government had already extended the temporary importation scheme under SRO410 four times, each time vowing that it would not be extended the scheme anymore. The conditional exemption under the SRO was effective from August 7, 1998.

Elaborating the impacts of these extension in the SRO, the officials said that the exporters were reluctant to register themselves under the facility of no-duty-no-drawback scheme because, according to officials, they were enjoying more facilities under the DTRE scheme.

Only around 350 exporters have so far registered themselves under the DTRE scheme with the tax authorities during the last three years since its announcement, officials added.

Elaborating the lukewarm response to this scheme, the officials said that although the exporter, under the scheme, would enjoy duty exemption from both customs and sales tax, they would have to keep record of every thing, which would be subjected to post-audit.

The officials said that the massive demand for extension in the temporary importation scheme was due to the fact that there was no concept of post-audit and check of goods to confirm if the goods were exported.

To make the SRO less lucrative, the CBR has recommended that a condition be included in the rules that imported input materials would not be sold in the local markets.

It was also proposed that no one would be allowed to claim duty drawback for value-addition in the imported input materials in the manufacturing of goods for its subsequent exports.

According to the officials, due to this extension, the DTRE scheme has failed to attract businessmen during the last three years to avail the facility of zero customs duty and sales tax on import of goods for its subsequent exports. They said that CBR has already amended the DTRE scheme in the budget for 2003-04 to make it more user-friendly.

The CBR has even allowed exporters to claim duty drawback under DTRE on electricity and gas used in the manufacturing of goods on its exports. Furthermore, they were also allowed that in case they could not export their goods under DTRE, on payment of penalty and full payment of duty, they could even sell it in the local markets.