Cbr presentation 1 dtre engineering

In the Name of Allah, the Most Beneficent, the
Most Merciful

OUR TOPIC TODAYOUR TOPIC TODAY
““Customs related procedures on exportCustoms related procedures on export
of goods and Revamped DTRE Schemeof goods and Revamped DTRE Scheme
in the context of Engineering Sector.”in the context of Engineering Sector.”

What is the DTRE Scheme?What is the DTRE Scheme?
 Duty & Tax Remission for Exports.Duty & Tax Remission for Exports.
 Allows for importAllows for import ANDAND local procurement oflocal procurement of
inputs without payment of customs duty,inputs without payment of customs duty,
excise duty, sales tax and withholding tax.excise duty, sales tax and withholding tax.
 Facility available only for use in theFacility available only for use in the
manufacture of goods meant for export.manufacture of goods meant for export.

Where can we find the DTREWhere can we find the DTRE
Rules?Rules?
 These Rules are a part of the CustomsThese Rules are a part of the Customs
Rules, 2001 notified vide SRORules, 2001 notified vide SRO
450(I)/2001 dated 18.06.2001.450(I)/2001 dated 18.06.2001.
 DTRE Rules begin at Rule 296 and endDTRE Rules begin at Rule 296 and end
at Rule 307 in the above mentionedat Rule 307 in the above mentioned
Customs Rules. (Only 12 Rules in total).Customs Rules. (Only 12 Rules in total).

WHAT DO THESE RULESWHAT DO THESE RULES
EXPLAINEXPLAIN
 Rule 296 – Definitions.Rule 296 – Definitions.
 Rule 297 – Scope of the DTRE facility.Rule 297 – Scope of the DTRE facility.
 Rule 298 – Application for DTRE Approval.Rule 298 – Application for DTRE Approval.
 Rule 299 – Input-Output ratios & wastages.Rule 299 – Input-Output ratios & wastages.
 Rule 300 – Grant of DTRE Approval.Rule 300 – Grant of DTRE Approval.

EXPLAIN-2EXPLAIN-2
 Rule 301 – Amendment, suspension orRule 301 – Amendment, suspension or
cancellation of DTRE Approval.cancellation of DTRE Approval.
 Rule 302 – Acquisition of duty-free inputs.Rule 302 – Acquisition of duty-free inputs.
 Rule 303 – Acquisition of duty-paid inputs.Rule 303 – Acquisition of duty-paid inputs.
 Rule 304 – Acquisition of locally made inputs.Rule 304 – Acquisition of locally made inputs.
 Rule 305 – Utilization of input goods.Rule 305 – Utilization of input goods.

EXPLAIN-3EXPLAIN-3
 Rule 306 – Export of manufactured goods.Rule 306 – Export of manufactured goods.
 Rule 307 – Exports to Afghanistan.Rule 307 – Exports to Afghanistan.
 Rule 307A – Unaccounted un-exported goods.Rule 307A – Unaccounted un-exported goods.
 Rule 307B – Refund of Sales Tax.Rule 307B – Refund of Sales Tax.
 Rule 307C – Records and documents.Rule 307C – Records and documents.

EXPLAIN-4EXPLAIN-4
 Rule 307D – Reconciliation Statement.Rule 307D – Reconciliation Statement.
 Rule 307E – DTRE Audit.Rule 307E – DTRE Audit.
 Rule 307F – Power to suspend DTRERule 307F – Power to suspend DTRE
facility.facility.
 Rule 307G – Miscellaneous.Rule 307G – Miscellaneous.

WHAT needs to be done to startWHAT needs to be done to start
using the DTRE Facilityusing the DTRE Facility
 Get registered with the Sales Tax DepartmentGet registered with the Sales Tax Department
through your local Sales Tax Collector.through your local Sales Tax Collector.
 Apply over the web through PACCS (Apply over the web through PACCS (
www.paccs.gov.pkwww.paccs.gov.pk) to your local Sales Tax) to your local Sales Tax
Collector by filling out the form appended withCollector by filling out the form appended with
the DTRE Rules.the DTRE Rules.
 Also declare the input-output ratios &Also declare the input-output ratios &
wastages of your products as per thewastages of your products as per the
appended form.appended form.

Some Caution & Some SecuritySome Caution & Some Security
 Before granting you a DTRE Approval, the CollectorBefore granting you a DTRE Approval, the Collector
may need to verify your production capacity &may need to verify your production capacity &
business turnover from your Sales Tax Profile tobusiness turnover from your Sales Tax Profile to
ensure that the quantity of input goods applied for isensure that the quantity of input goods applied for is
commensurate with your actual production andcommensurate with your actual production and
business capacity. He may also consult the records ofbusiness capacity. He may also consult the records of
IOCO to ensure that ratios & wastages claimed are asIOCO to ensure that ratios & wastages claimed are as
per industry standards.per industry standards.
 If the Collector is satisfied with your bona fides, heIf the Collector is satisfied with your bona fides, he
shall issue you a DTRE Approval & secure theshall issue you a DTRE Approval & secure the
suspended duty & taxes against prescribed securitysuspended duty & taxes against prescribed security
instruments, which you have to furnish.instruments, which you have to furnish.

How to Proceed Further & AcquireHow to Proceed Further & Acquire
Input GoodsInput Goods
 Once you have the Approval, you can now freely import/acquireOnce you have the Approval, you can now freely import/acquire
duty-free inputs. Local inputs are to be reported by you to theduty-free inputs. Local inputs are to be reported by you to the
Regulatory Collector to be fed into PACCS while imported inputsRegulatory Collector to be fed into PACCS while imported inputs
are fed into PACCS by the Customs staff at the port of import.are fed into PACCS by the Customs staff at the port of import.
 You can also now acquire duty-paid input goods for which youYou can also now acquire duty-paid input goods for which you
can later claim duty drawback as per the relevant duty drawbackcan later claim duty drawback as per the relevant duty drawback
notification.notification.
 If you acquire inputs from registered person, then he is liable toIf you acquire inputs from registered person, then he is liable to
issue you a zero-rated invoice under section 23 of the Sales Taxissue you a zero-rated invoice under section 23 of the Sales Tax
Act, mentioning therein your Approval No. & date.Act, mentioning therein your Approval No. & date.

How Much Time do you have toHow Much Time do you have to
Utilize the Input GoodsUtilize the Input Goods
 You now need to utilize those inputsYou now need to utilize those inputs
goods within eighteen months from thegoods within eighteen months from the
date of acquisition.date of acquisition.
 After utilization, you can now exportAfter utilization, you can now export
your goods by filing a Bill of Export oryour goods by filing a Bill of Export or
Goods Declaration mentioning thereinGoods Declaration mentioning therein
the Approval No. & date.the Approval No. & date.

WHAT to do now that Export hasWHAT to do now that Export has
taken placetaken place
 Within sixty days of the expiry of the utilizationWithin sixty days of the expiry of the utilization
period, or even earlier, after export, you willperiod, or even earlier, after export, you will
have to file a reconciliation statement with thehave to file a reconciliation statement with the
Regulatory Collector.Regulatory Collector.
 The Collector will then carry out a post-The Collector will then carry out a post-
exportation audit of your record & if you haveexportation audit of your record & if you have
fulfilled your obligations, your securityfulfilled your obligations, your security
instruments would be released.instruments would be released.

WHAT RECORDS ARE TO BE KEPT &WHAT RECORDS ARE TO BE KEPT &
MAINTAINED BY THE DTRE USERMAINTAINED BY THE DTRE USER
 Copies of DTRE applications and DTRE approvals.Copies of DTRE applications and DTRE approvals.
 Records of acquisitions of input goods and exports.Records of acquisitions of input goods and exports.
 Record for destruction or other authorized disposal ofRecord for destruction or other authorized disposal of
input goods and output goods.input goods and output goods.
 Export contracts or orders and supply contracts orExport contracts or orders and supply contracts or
orders.orders.

WHAT GOODS ARE NOT WITHIN THEWHAT GOODS ARE NOT WITHIN THE
AMBIT OF DTRE SCHEMEAMBIT OF DTRE SCHEME
 The DTRE facility is not admissible to:The DTRE facility is not admissible to:
o Polyester Staple Fiber (PSF), Pure TerephthalicPolyester Staple Fiber (PSF), Pure Terephthalic
Acid (PTA), Raw Sugar, Cooking Oil or VegetableAcid (PTA), Raw Sugar, Cooking Oil or Vegetable
Ghee or their raw materials.Ghee or their raw materials.
o Goods which are banned or restricted under theGoods which are banned or restricted under the
Import & Export Policy Orders on account ofImport & Export Policy Orders on account of
national security, public health and cultural, moralnational security, public health and cultural, moral
or religious considerations.or religious considerations.

Export Facilitation Provisions in theExport Facilitation Provisions in the
DTRE Rules-1DTRE Rules-1
 Allow the import AND local procurement of all inputAllow the import AND local procurement of all input
goods needed for exports production, without payment ofgoods needed for exports production, without payment of
customs duty, central excise duty, advance income taxcustoms duty, central excise duty, advance income tax
and sales tax.and sales tax.
 Such duty-free imports and local procurement areSuch duty-free imports and local procurement are
available to direct as well as indirect exporters.available to direct as well as indirect exporters.
 The indirect exporters are those who provide input goodsThe indirect exporters are those who provide input goods
or services to direct exporters for the purpose of exportor services to direct exporters for the purpose of export
production.production.

 A wider definition of the term “export” that includes anyA wider definition of the term “export” that includes any
supply of goods:supply of goods:
o By an indirect exporter to a direct exporter;By an indirect exporter to a direct exporter;
o Against international tenders;Against international tenders;
o To projects or sectors entitled to import or purchase such goodsTo projects or sectors entitled to import or purchase such goods
free of duties and taxes; andfree of duties and taxes; and
o To Export Processing Zones.To Export Processing Zones.

 A wider definition of the term “input goods” thatA wider definition of the term “input goods” that
not only includes services but also:not only includes services but also:
o Trims and accessories;Trims and accessories;
o Electricity and gas on which sales tax has been paid;Electricity and gas on which sales tax has been paid;
andand
o Furnace or diesel oil for the generation of electricityFurnace or diesel oil for the generation of electricity
used or consumed in the manufacture of exportused or consumed in the manufacture of export
goods.goods.

 A wider definition of the term “import” to include:A wider definition of the term “import” to include:
o Purchase of inputs from EPZs.Purchase of inputs from EPZs.
o Purchase of inputs from a Private or Public BondedPurchase of inputs from a Private or Public Bonded
Warehouse including Manufacturing Bond.Warehouse including Manufacturing Bond.

 DTRE Scheme has been granted wide applicability andDTRE Scheme has been granted wide applicability and
is available to:is available to:
o All persons registered as exporter under the Sales Tax Act,All persons registered as exporter under the Sales Tax Act,
1990.1990.
o All commercial exporters engaged in the purchase and export ofAll commercial exporters engaged in the purchase and export of
same-state-goods.same-state-goods.
o All contracted vendors of foreign manufacturers or foreignAll contracted vendors of foreign manufacturers or foreign
buyers.buyers.
o All persons who make value-addition in the manufacture andAll persons who make value-addition in the manufacture and
export of goods.export of goods.

 DTRE Approval can be sought on the basis of:DTRE Approval can be sought on the basis of:
o Specific export or supply contract or order.Specific export or supply contract or order.
o Past export performance substantiated vide Bills ofPast export performance substantiated vide Bills of
Export or e-Forms or Sales Tax Returns for the pastExport or e-Forms or Sales Tax Returns for the past
two years.two years.
o Past supplies to direct or commercial exporters (inPast supplies to direct or commercial exporters (in
case of indirect exporters).case of indirect exporters).

 A consolidated DTRE Approval can be soughtA consolidated DTRE Approval can be sought
by an indirect exporter who has more than oneby an indirect exporter who has more than one
Supply Contract/Purchase Order from a direct orSupply Contract/Purchase Order from a direct or
commercial exporter.commercial exporter.
 Tags and printed materials supplied by a foreignTags and printed materials supplied by a foreign
supplier without involvement of foreign exchangesupplier without involvement of foreign exchange
from Pakistan are allowed to be imported withoutfrom Pakistan are allowed to be imported without
any quantitative restriction.any quantitative restriction.

 A flexible regime of security instruments in lieuA flexible regime of security instruments in lieu
of suspended duty & taxes:of suspended duty & taxes:
o Indemnity bond alongwith the post-dated cheque fromIndemnity bond alongwith the post-dated cheque from
a direct and indirect exporter;a direct and indirect exporter;
o Bank guarantee from a commercial exporter; andBank guarantee from a commercial exporter; and
o Corporate guarantee from exporters in the corporateCorporate guarantee from exporters in the corporate
sector.sector.

 Where export under a separate contract can notWhere export under a separate contract can not
be arranged out of regular production due tobe arranged out of regular production due to
valid reasons, past export performance as wellvalid reasons, past export performance as well
as contract-based DTRE Approval may beas contract-based DTRE Approval may be
granted concurrently for the output goods of thegranted concurrently for the output goods of the
same or different description.same or different description.
 No DTRE application can be rejected withoutNo DTRE application can be rejected without
affording a hearing opportunity to the applicant.affording a hearing opportunity to the applicant.

 A DTRE user may apply to a RegulatoryA DTRE user may apply to a Regulatory
Collector for amendment in the previousCollector for amendment in the previous
Approval or for its cancellation and each suchApproval or for its cancellation and each such
request has to be decided within ten days.request has to be decided within ten days.
 No request for a cancellation of, or amendmentNo request for a cancellation of, or amendment
in, an existing DTRE Approval can be rejectedin, an existing DTRE Approval can be rejected
without affording a hearing opportunity.without affording a hearing opportunity.

 The Regulatory Collector may allow a DTRE user toThe Regulatory Collector may allow a DTRE user to
utilize his duty-free acquired input goods for his newutilize his duty-free acquired input goods for his new
Approval if his previous DTRE Approval has beenApproval if his previous DTRE Approval has been
cancelled due to pre-mature termination or cancellationcancelled due to pre-mature termination or cancellation
of the export or supply contract or if such input goodsof the export or supply contract or if such input goods
have been rendered surplus for any valid reason.have been rendered surplus for any valid reason.
 A DTRE user is entitled to claim duty drawback onA DTRE user is entitled to claim duty drawback on
acquisition of duty-paid input goods subject to theacquisition of duty-paid input goods subject to the
applicable duty drawback notification after full dischargeapplicable duty drawback notification after full discharge
of the liabilities and obligations.of the liabilities and obligations.

 A DTRE user may, with the permission of the Regulatory Collector, disposeA DTRE user may, with the permission of the Regulatory Collector, dispose
of the input goods or output goods within the prescribed utilization period inof the input goods or output goods within the prescribed utilization period in
the following manner, namely:the following manner, namely:
o Return to person who had supplied the input goods.Return to person who had supplied the input goods.
o Sale, by a DTRE user to another DTRE user for export.Sale, by a DTRE user to another DTRE user for export.
o Local sale (upon permission by the Collector) on payment of duties and taxesLocal sale (upon permission by the Collector) on payment of duties and taxes
leviable at the time of such saleleviable at the time of such sale
o Destruction after approval of the Regulatory Collector if goods are not fit forDestruction after approval of the Regulatory Collector if goods are not fit for
consumption or sale with remission of duty and taxes.consumption or sale with remission of duty and taxes.
o Local sale of B-grade products, factory rejects or wastage on payment of leviableLocal sale of B-grade products, factory rejects or wastage on payment of leviable
duties and taxes.duties and taxes.

 Refund of sales tax on electricity or gas orRefund of sales tax on electricity or gas or
services utilized as input goods for DTREservices utilized as input goods for DTRE
purpose shall be admissible to a DTREpurpose shall be admissible to a DTRE
user as admissible under the Sales Taxuser as admissible under the Sales Tax
Act, 1990 if the value of tax paid inputsAct, 1990 if the value of tax paid inputs
other than electricity, gas and servicesother than electricity, gas and services
does not exceed 20% of the total value ofdoes not exceed 20% of the total value of
the DTRE approval.the DTRE approval.

DTRE SCHEME & THEDTRE SCHEME & THE
PROBLEMSPROBLEMS
OF ENGINEERING SECTOR - 1OF ENGINEERING SECTOR - 1
 The Approval procedure is lengthy andThe Approval procedure is lengthy and
complicated.complicated.
 Utilization period of 18 months is tooUtilization period of 18 months is too
short.short.
 PDCs and IBs remain stuck due toPDCs and IBs remain stuck due to
delayed audits.delayed audits.

DTRE SCHEME & THEDTRE SCHEME & THE
PROBLEMSPROBLEMS
OF ENGINEERING SECTOR - 2OF ENGINEERING SECTOR - 2
 Local suppliers of inputs avoid issuingLocal suppliers of inputs avoid issuing
zero-rated invoices.zero-rated invoices.
 Input-output ratios are not correctlyInput-output ratios are not correctly
determined.determined.
 The necessity to apply via PACCSThe necessity to apply via PACCS
increases the access time to DTRE.increases the access time to DTRE.

The Approval procedure is lengthy andThe Approval procedure is lengthy and
complicated.complicated.
 A question of balance between quickness andA question of balance between quickness and
compliance formalities prescribed by rule 300.compliance formalities prescribed by rule 300.
 Bona fides of the applicant.Bona fides of the applicant.
 Feeding the Approvals into PACCS.Feeding the Approvals into PACCS.
 Securing of suspended duty & taxes through IB/BG/CG fromSecuring of suspended duty & taxes through IB/BG/CG from
direct/indirect, commercial exporters or corporate exportersdirect/indirect, commercial exporters or corporate exporters
respectively.respectively.
 Verification of production capacity/business turnover toVerification of production capacity/business turnover to
ensure that import is commensurate with capacity.ensure that import is commensurate with capacity.
 Verify input-output ratios & wastages are as per industryVerify input-output ratios & wastages are as per industry
standard. Collector may have to consult IOCO in this regard.standard. Collector may have to consult IOCO in this regard.
 Details of past exports performance or the Contract or bothDetails of past exports performance or the Contract or both
need to be verified.need to be verified.
 In case of rejection, hearing opportunity has to be afforded.In case of rejection, hearing opportunity has to be afforded.

Utilization period of 18 months isUtilization period of 18 months is
too short.too short.
 18 months is from the date of acquisition not18 months is from the date of acquisition not
Approval.Approval.
 Rule 305 provides for further extension by the CBR.Rule 305 provides for further extension by the CBR.
 CBR is liberal in granting extensions in individual andCBR is liberal in granting extensions in individual and
deserving cases.deserving cases.
 However, blanket extension in the utilization periodHowever, blanket extension in the utilization period
will give rise to compliance issues.will give rise to compliance issues.

PDCs and IBs remain stuck due toPDCs and IBs remain stuck due to
delayed audits.delayed audits.
 Some onus on the DTRE users because, asSome onus on the DTRE users because, as
per rule 307E, post-exportation audit has toper rule 307E, post-exportation audit has to
be completed within a period of twelve monthsbe completed within a period of twelve months
after expiry of the utilization period or afterafter expiry of the utilization period or after
filing of the reconciliation statement withinfiling of the reconciliation statement within
sixty days of the expiry of the utilizationsixty days of the expiry of the utilization
period, whichever is earlier.period, whichever is earlier.
 However, in specific cases, users are free toHowever, in specific cases, users are free to
approach CBR if there is delay beyond theapproach CBR if there is delay beyond the
specified period.specified period.

Local suppliers of inputs avoid issuingLocal suppliers of inputs avoid issuing
zero-rated invoices.zero-rated invoices.
 The apparent reason for this is that localThe apparent reason for this is that local
suppliers want to hide the quantum of theirsuppliers want to hide the quantum of their
business by avoiding documentation.business by avoiding documentation.
 The solution is to identify and report to theThe solution is to identify and report to the
Collector or CBR any and all such instances.Collector or CBR any and all such instances.
 Rule 304 (2) caters to registered suppliers;Rule 304 (2) caters to registered suppliers;
hence, the reporting will lead to action.hence, the reporting will lead to action.

Input-output ratios are not correctlyInput-output ratios are not correctly
determined.determined.
 Sales Tax staff is not supposed to be experts on ratios &Sales Tax staff is not supposed to be experts on ratios &
wastages. They simply know the law & procedures.wastages. They simply know the law & procedures.
 Under rule 300 (3) (b), the Collector is free to consult the recordUnder rule 300 (3) (b), the Collector is free to consult the record
of IOCO to ensure that ratios & wastages claimed are as perof IOCO to ensure that ratios & wastages claimed are as per
industry standards.industry standards.
 Users are free to disagree and can ask the Collector for aUsers are free to disagree and can ask the Collector for a
referral to the EDB.referral to the EDB.
 Collector is free to avail any forum to establish the bona fides ofCollector is free to avail any forum to establish the bona fides of
a DTRE applicant and application.a DTRE applicant and application.
 Problems in ratio determination can be communicated to CBR,Problems in ratio determination can be communicated to CBR,
which can take up specific cases with the Collector.which can take up specific cases with the Collector.

The necessity to apply via PACCSThe necessity to apply via PACCS
increases the access time to DTRE.increases the access time to DTRE.
 PACCS has been established in the larger economic interest.PACCS has been established in the larger economic interest.
 Identify & specify the problems and let CBR know so that these can beIdentify & specify the problems and let CBR know so that these can be
rectified.rectified.
 Before PACCS, DTRE users had to import goods through one particularBefore PACCS, DTRE users had to import goods through one particular
port because a paper based register was maintained only at oneport because a paper based register was maintained only at one
particular Customs station. Since quota debiting was involved, theparticular Customs station. Since quota debiting was involved, the
goods had to travel to the port where the register was placed beforegoods had to travel to the port where the register was placed before
clearance could be allowed by Customs. Thus users were incurringclearance could be allowed by Customs. Thus users were incurring
transportation cost.transportation cost.
 All registers are electronic in the PACCS environment and are availableAll registers are electronic in the PACCS environment and are available
online to all Customs formations. With PACCS e-registers, businessesonline to all Customs formations. With PACCS e-registers, businesses
are free to clear their cargo from any convenient port.are free to clear their cargo from any convenient port.

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