ISLAMABAD: In a high level meeting with the Chief Collectors and Collectors of Pakistan Customs FBR Chairman Tariq Bajwa has issued directions to usher in thorough scrutiny as to why the customs duty on certain items at the import stage has not correspondingly increased against rise in sales tax collections on same imports.
The observations were made in the meeting attended by Chief Collectors and Collectors from all over the country with Chairman Tariq Bajwa in the chair. The conference was held to check revenue leakage particularly customs duty at the import stage for improving collection through clearance of imported consignments. The agenda of the conference also included revenue collection through sales tax, withholding tax and federal excise duty during third quarter of 2013-14 specifically March, 2014.
Chief Collectors and Collectors of Customs presented the analysis of lower collection of sales tax and withholding tax in March, 2014 apart from customs duty.
As noted in the meeting there are few different situations which resulted in less customs duty collection as compared to collection of sales tax on imports: if customs duty has not been assessed by the customs officers concerned, however, full sales tax has been charged on the same import; if undue benefit of the concessionary SRO has been given to the importer; if some concessionary SROs apply lower rate of duty to certain industries, but exemption has been wrongly granted whereas full sales tax has been charged on the same item; if duty is exempt legally, but sales tax is applicable on the same item where standard rate of 17 per cent has been charged; if some concessionary SROs apply concessionary/lower rate of duty, but 17 per cent sales tax is applicable; if sales tax is charged on duty paid value, but duty has been charged on CIF value. This shows that sales tax would definitely be more as compared to duty as sales tax is always being charged on duty paid value. In such a situation, collection of sales tax would be more on the same item as compared to customs duty; and if benefit of exemption has been given to the importer by not charging duty due to illegal act of the officials concerned.
As to FBR Chairman’s concerns with the question of improvement in sales tax collection contrary to customs duty collection at the import stage in case of the same products, one of the reasons forwarded was that the customs duty rates are less on such items compared to the sales tax at the import stage. However, analysis presented in the conference revealed that all the items showing low collection of duty are not in the lower customs tariff slabs where sales tax collection improved during this period. The whole analysis confirmed that the customs authorities are not effectively checking mis-declaration or under-valuation of goods at the import stage. The actual customs duty to be collected through clearance of imported consignments is not coming compared to the number of goods cleared from ports.
It was pointed out that there are two broad components of imports i.e. dutiable imports and duty-free imports. The base of customs duty is obviously dutiable imports. On average around 30-35 per cent of the total imports are dutiable while the remaining items are duty-free. Moreover, duty free imports have improved while dutiable imports grew less in percentage. Hence, this is a major reason for marginal growth in the collection of customs duty.
Tariq Bajwa issued instructions to the Chief Collectors and Collectors of Customs to immediately take necessary measures to check the mis-declarations of goods at the import stage. It has been observed that the tariff classification under Pakistan Customs Tariff (PCT) headings and description of goods under Harmonized System (HS) codes is not done properly which is also one of the factors for low customs duty during current fiscal year.
The chairman also directed the Collectors of Customs to check loopholes at the import stage to ensure proper collection of customs duty on the items cleared from ports. Tax authorities were also directed to take measures for accurate assessment of imported goods which would improve customs duty collection in the remaining period of the fiscal year 2013-14.
While addressing the conference, Tariq Bajwa observed that best teams in the form of Chief Collectors and Collectors have been deputed at Model Customs Collectorates. FBR was expecting best results from them, but if best teams cannot achieve the desired results then their use would be questionable.
He also said that although our forces has lesser facilities, man power and logistic but what is needed is the prudence in the use of these to handle the situation at present.
The FBR Chairman also directed the Collectors of Customs to conduct thorough analysis of revenue collection trend on the import of High Speed Diesel (HSD). The FBR specifically issued instructions to the collectorates known as Diesel Collectorates to carryout analysis of the HSD. The Collectors of Customs Faisalabad and Multan would conduct analysis on the import of HSD from all angles including valuation, import, clearance, marketing and supply of the commodity. Both the Diesel Collectorates would also analyse the revenue collection from the HSD from all collectorates covering all areas in this regard.
During the meeting it was observed that one of the reasons for slum in the revenue collection is the result of low volume of import of furnished oil which is one of the main sources of revenue collection as a whole, the sources in FBR revealed. Government is focusing to give boost up the refineries in Pakistan rather than to depend on import of furnished oil and for this purpose the raw, crude oil is being imported which has no or very less tax on import stage.
The conference also finalised a strategy to achieve revenue targets of customs duty, sales tax, withholding tax and federal excise duty in the remaining period of the 2013-14.
A special committee of the Directorate General of Customs Valuation Karachi has been engaged in analysing the valuation ruling for accurate assessment of duty at the import stage.