FBR explains treatment of duty, taxes on goods imported under foreign trade agreements

FBR explains treatment of duty, taxes on goods imported under foreign trade agreements

The Federal Board of Revenue (FBR) has provided comprehensive details regarding the taxes for goods imported under trade agreements with foreign countries.

In a notification issued under the Customs Act, 1969, updated till June 30, 2019, the FBR elucidated the treatment of duty and taxes under Section 18C of the Customs Act.

Section 18C: Rates of Duty and Taxes and Determination of Origin under Trade Agreements:

Sub-Section (1): Under a trade agreement between the Government of Pakistan and a foreign country or territory, where duty at a rate lower than that specified in the First Schedule is to be charged on articles produced or manufactured in that foreign country or territory, the Federal Government may, through a Gazette notification, establish rules for determining the origin of the article. Additionally, owners are required to make a claim at the time of importation, supported by prescribed evidence, for assessment at the appropriate lower rate under the trade agreement.

Sub-Section (2): In cases where a preferential rate of duty is specified in the First Schedule or is admissible through a notification under Sub-Section (1), the duty levied and collected will be at the standard rate unless the owner claims, at the time of importation, that the article is chargeable with a preferential rate of duty. The article must be determined, in accordance with the rules established under Sub-Section (1), to be the produce or manufacture of the preferential or free trade area, as notified under Sub-Section (3).

Sub-Section (3): The term “preferential area or free trade area” is defined for this section and the First Schedule as any country or territory declared by the Federal Government, through a Gazette notification, to be such an area.

Sub-Section (4): Notwithstanding the provisions of Sub-Sections (1) and (2), the Federal Government, in the interests of trade, including the promotion of exports, may, through a Gazette notification, discontinue, increase, or decrease the preferential rate for an article specified in the First Schedule. This immediate action is taken to address trade considerations and may involve discontinuation, increase, or decrease, as deemed necessary.

The elucidation provided by the FBR under Section 18C aims to offer clarity to stakeholders involved in international trade. By detailing the process of determining the origin of goods and the conditions under which preferential rates of duty apply, the FBR seeks to ensure transparency and facilitate smooth and compliant trade practices. The notification underscores the government’s commitment to promoting fair and effective trade relations with foreign partners while adhering to international trade agreements.