FBR to prevent misuse of tax concessions for CPEC imports

KARACHI: The Federal Board of Revenue (FBR) has devised a plan to preempt misuse of duty and tax concessions granted on import of goods for the ongoing projects under the China-Pakistan Economic Corridor (CPEC), officials said on Saturday, considering the past such incidences in case of Afghan-Pakistan transit trade.

“The foolproof plan will ensure that only genuine importer will get concessions and exemptions granted by the FBR,” a customs official said on condition of anonymity.

The customs authorities are expecting massive imports to be made for CPEC’s infrastructure development projects “and there are chances of misuse of the facility.” 

The imports have already been started and the FBR issued several notifications to grant exemption and concession from duty and taxes to consignments bound for CPEC projects.

“The CPEC-related imports will be cleared through computerised system,” the official said. “The plan will also ensure the safe transportation through installation of trackers on the containers and vehicles.”

In order to monitor the duty- and tax-free imports, the FBR introduced ‘indemnity bond’ for contractors importing goods for CPEC projects. If an importer is found involved in misusing the incentives, the entire duty and taxes would be recovered from him.

The worth of CPEC, which is termed as the game changer for the economy of Pakistan, has reached $54 billion (Rs5,700 billion), financing rail-based mass transit, special economic zones, energy, infrastructure development and Gwadar-related projects. Initially, Chinese government pledged $46 billion to build a series of infrastructure development projects.

The FBR issued several notifications to grant exemption from duty and taxes on import of equipment and capital goods to be used in these projects. 

The official said the strategy was formulated considering the massive misuse of tax incentives specific for consignments under the Afghan transit trade.

The past of experience of Pakistan Customs, regarding the preferential clearance of consignments under the Afghan-Pakistan Transit Trade Agreement (APTTA), was not good. Fake import certificates were used to wrongfully claim the tax incentives. In reality, the goods bound for Afghanistan, under the APTTA, were illegally unloaded on Pakistani soil, incurring huge losses to national exchequer as well as local manufacturing sector.