Misuse of jewelry import/export facility: Rs109 million recovered in Entrustment Scheme

ISLAMABAD: The Federal Tax Ombudsman has taken notice of the slow implementation of recommendations in cases of misuse of jewelry import/export facility under the Entrustment Scheme.

The FTO, in a suo moto case, had recommended to the FBR and FIA to initiate an inquiry against all the officers, departments and importers/exporters involved in misuse of imports-cum-exports facility in respect of gold, jewellery and other precious metals, resulting in massive loss of revenue to national exchequer.

The FTO findings had revealed that gold worth billions of rupees was either not exported against imported gold or was exported against fake form E.

The FTO was apprised in monthly performance review meeting in May 2021 that so far Rs109.4 million had been realized against 17 exporters and gold valued at Rs34.5 million has been re-imported against export of jewellery.

The FTO has directed the regional offices to vigilantly pursue with all departments to get the recommendations in the case fully implemented. He specially stressed the need for speedy adjudication and recovery of US$142.85 million stuck up with the adjudicating authorities. The FTO also sought early finalisation of the departmental inquiries as well as initiation of criminal proceedings by the FIA against officials/persons involved, as recommended by the FTO report. The FTO also directed to seek follow-up reports from the FIA on recommendation on the cases to initiate criminal proceedings against officials/persons involved as earlier referred to the FIA.

The FTO had stated in its decision in May 2019 that the export promotion scheme did not put in place institutional mechanism to stop abuse of entrustment scheme/self-consignment scheme regulated through concessional SROs issued by the Ministry of Commerce. As a consequence, the importers-cum-exporters deceived the departments with impunity, especially in cases where concession available under the entrustment scheme/self-consignment scheme was misused.

The entrustment scheme provides facility for export of jewellery against imported gold supplied as partial advance payment, by the foreign buyer to be used in the manufacture of jewellery to be exported. The exporter is required to export eligible and authorized items within 120 days from the date of import. Under self-consignment scheme, export of gold jewellery is made from locally procured gold and gemstones and sale proceeds are realized in foreign exchange. The registered exporter shall apply to the TDAP for export authorization. The sale proceeds shall be realized within 120 days from the date of export and the commercial banks shall ensure that sale proceeds are repatriated in full within 120 days; otherwise, commercial banks shall inform the State Bank of Pakistan as well as TDAP. The importers cum exporters who could export under the entrustment scheme and local exporters under self-consignment scheme had blatantly misused the scheme during the period 2008-2018.