The FBR has issued an SRO 204(I)/2025 to introduce draft amendments in the Customs Rules, 2001, on Tuesday. A tax expert opined that by excluding iron and steel scrap from EFS. The importers of compressors and motors will now have to pay all taxes at import stage, such as customs, sales tax, and income tax.
Moreover, selling their scrap locally will prevent them from issuing sales tax invoices, effectively closing opportunities for tax evasion. As a result, all units that previously purchased fraudulent invoices from importers of compressors and motor scraps will now be required to pay the full 18% sales tax when buying local or compressor scrap.
The industry is actively advocating for this change to ensure fair tax compliance across the board. This initiative aims to establish a level playing field in the long steel sector, as per reports.
As per the revised procedure, the proposed changes in the EFS seek the reduction in input utilisation period, input authorisation based on production capacity and input-output ratio, replacement of insurance guarantees with bank guarantees, vendor facilitation controls, withdrawal of samples to ensure the utilisation of imported input in the exported goods, and withdrawal of EFS facility from importers of iron and steel scrap.
The input goods acquired under these rules are expected to be utilised within nine months and are extendable in exceptional circumstances by a committee to be constituted by the board.
“For supplies against international tenders or to exempt projects or sectors in Pakistan, the user shall be required to file a declaration in the WeBOC system, “the FBR said.
In a bid to enhance compliance and prevent misuse, authorities have introduced stringent measures for the authorization of input goods. The authorisation of the value of input goods must be uploaded for each year based on the annual estimated requirement determined by the Input Output Coefficient Organisation (IOCO).
The renewal of this authorization for the subsequent year will be contingent upon the satisfaction of the regulatory collector. Approval will only be granted if no action is pending against the user under the Customs Act and all reconciliation statements have been duly submitted.
Furthermore, in cases where input goods are found to have been illegally removed, improperly disposed of, retained beyond the allowed period, or have failed to meet the required value addition, the regulatory collector will take immediate action. including the immediate encashment of the PDC or bank guarantee.