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CBR clarifies rebate structure for imported polyester fibre

SOHAIL SARFRAZ

ISLAMABAD: The Central Board of Revenue (CBR) has clarified that duty drawback is admissible for imported polyester fibre used as input for manufacture and export of blended fabrics, it was learnt on Tuesday.

The schedule 11 of SRO 172(I)/99 issued on March 22, 1999, is applicable to all blended fabrics of polyester and cotton in which duty-paid polyester has been used as an input.

Field formations were seeking clarifications from the CBR regarding SR 1359(I)/99 of December 18, 1999, whether this notification is applicable to all exports or its scope is restricted to exporters operating Open Bonded Manufacturing Units under SRO 1140(I)/97 of Nov 6, 1997.

The board has explained to all its collectors of customs (export) that vide SRO 1359(I)/99 of Dec 18, 1999, schedule XXVII has been added to SRO 172(I)/99 issued on March 22, 1999. The aforesaid new schedule to SRO 172(I)/99 authorises repayment of customs duty paid on polyester cotton yarn used in the manufacture and export of polyester cotton blended fabrics.

The CBR has elaborated that the present rule 13 of SRO 1140(I)/97 was based on the recommendations of trade through Export Promotion Bureau (EPB) and Ministry of Commerce.

This amendment was made in SRO 1140(I)/97 on July 23, 1998, which brought a conceptual change in drawback payment.

Prior to this amendment any goods entering the manufacturing bonds established under SRO 1140(I)/97 were treated to have been exported the moment they entered the bonded premises and rebate was admissible on these goods. For example, if polyester cotton blended yarn in which duty-paid polyester was used entered the bond, duty drawback was admissible on the yarn. But due to the aforesaid amendment of rule 13 rebate is admissible on the end product (fabrics) using such yarns since July 23, 1998.

The board has further explained to the collectors (exports) that in order to clarify the amended rule 13, a customs general order 2/99 of February 19, 1999, was issued. According to the rule 13 as amended, manufacturers-cum-exporters of open manufacturing units are entitled to duty drawback in the prescribed manner.

The CBR has also clarified another issue that has complicated determination of the payable amount of duty drawback in existing prescribed manner is the fact that under schedule-II to SRO 172(I)/99 of March 22, 1999 duty drawback is admissible on polyester fibre. Whereas in the case of fabrics manufactured in the open bonded manufacturing units under SRO 1140(I)/97 the manufacturers are using polyester yarn imported free of taxes under this notification as well as duty-paid poly-cotton yarn purchased from the local market. As polyester yarn or poly-cotton yarn is a raw material instead of polyester, these exports do not qualify for duty drawback under schedule-II of SRO 172(I)/99 as the raw material in schedule-II is polyester fiber and not polyester yarn.

To resolve this problem regarding rule 13 of SRO 1140(I)/97 read with customs general order 2/99 survey of units operating under SRO 1140 was conducted by the collectorate of customs, Faisalabad, for determination of duty drawback for units using duty-paid poly-cotton yarn in addition to use of duty free polyester yarn, the CBR maintained.

Based on the aforesaid survey, SRO 135(I)/99 of Dec 18, 1999 has been issued.

The rebate rates indicated in this SRO are accordingly meant for units operating under SRO 1140(I)/97 issued on Nov 6, 1997, and take into account of duty-paid poly-cotton yarn only.

In this regard, the board has given instructions to customs collectors all over the country that rebate claims of such units for the period from July 23, 1998, onwards may be finalised accordingly.