ISLAMABAD, Jan 23: The government is likely to allow payment of duty drawback to exporters on local purchase of PTA raw materials used in manufacturing of polyester staple fibre (PSF).

Well-placed sources told Dawn that Commerce Secretary Mirza Qamar Baig would discuss the issue with the relevant stakeholders at a meeting on Friday.

The duty drawback is allowed under section 21(C) of Customs Act, 1969 to the extent of customs duty paid on imported raw materials/input materials used in the manufacturing of goods meant for export.

Sources said that the issue, if decided, would not only be in violation of Customs Act but would also result in substantial loss to the national kitty.

Elaborating further, the sources said that the issue was being raised for consideration following the government decision of allowing compensatory duty drawback on PSF for more than one year, which would cause Rs1 billion loss to the national exchequer.

The sources said duty drawback is only allowed on imported PTA but the same if allowed on local purchase against the relevant rules would benefit only a few manufacturers.

According to the law, the local produced could not be treated as imports for the purpose of duty drawback, while the tax authorities could not allow repayment of customs duty actually paid on the imported components.

The sources said that the government has also banned the import of two items — PSF and PTA — under DTRE scheme, which was a major demand of the other importers to allow them the import of these two items to register themselves under the no duty and no rebate regime.

Explaining further, the sources said that so far only around 300 exporters have registered themselves under the DTRE regime during the last about two years.

According to the sources, as long as the government has not reduced the rates of duty drawback on export of goods to its actual value, no exporter would opt for the new system.

The tax authorities were yet to reduce the rates of duty drawback on maximum items to make it equatable to the value of duty paid on import of these items.