Karachi, August 28, 2024 – The Federal Board of Revenue (FBR) on Wednesday issued a general order to ease the export process for unmanufactured tobacco, addressing longstanding concerns among exporters regarding the payment of federal excise duty (FED).
Unmanufactured tobacco, classified under S.No.7 to Table-I of Schedule-I of the Federal Excise Act, 2005, is subject to FED. According to Federal Excise General Order No.02 of 2005 (FEGO), the removal of unmanufactured tobacco from manufacturing premises for sale or storage is only allowed upon the payment of this duty, the FBR said.
This regulation has created challenges for exporters who, despite being eligible for zero-rating under Section 5 of the Act, have been required to pay FED when moving unmanufactured tobacco from manufacturing premises to warehouses for storage, the FBR added.
To mitigate these difficulties, the FBR has now exercised its authority under Section 43 of the Federal Excise Act, 2005, to permit GLT units engaged in the export of unmanufactured tobacco to transfer their products from manufacturing premises to designated warehouses without paying FED. This measure is subject to several conditions to ensure compliance and security.
Key conditions include:
1. Certification of Storage Space: The Deputy Commissioner Inland Revenue (DCIR) must certify that there is no available space within the manufacturing premises of the GLT unit for storing unmanufactured tobacco.
2. Declared Warehouse: Unmanufactured tobacco must be stored in a warehouse that has been officially declared to the relevant Commissioner Inland Revenue (IR).
3. Confirmed Export Orders: The GLT unit must have confirmed export orders for the unmanufactured tobacco in question.
4. Supervised Movement: All movements of unmanufactured tobacco, whether from the manufacturing premises to the warehouse or for export, must be supervised by an officer of Inland Revenue not below the rank of Assistant Commissioner-IR. This officer must be authorized by the concerned Commissioner-IR.
5. Warehouse Security: The keys to the warehouse will remain in the custody of an officer designated by the Commissioner-IR to ensure security and prevent unauthorized access.
6. Record Maintenance: The GLT unit must maintain specific registers at both the manufacturing premises and the warehouse, as outlined in Annex-I and Annex-II of the General Order, to record the movement of unmanufactured tobacco.
7. Transport Advice: A transport advice, issued in duplicate and specified in Annex-III, must accompany all shipments from the manufacturing premises to the warehouse.
8. Bank Guarantee Requirement: Before moving unmanufactured tobacco to a warehouse outside the manufacturing premises, the GLT unit must provide a bank guarantee covering the amount of FED involved. This guarantee will be realized in case of pilferage and will be released proportionately as export proceeds are realized.
9. Access for Inland Revenue Officers: An authorized officer of Inland Revenue, not below the rank of Assistant Commissioner-IR, must have unrestricted access to any warehouse used for storing unmanufactured tobacco at all times.
This new policy aims to streamline the export process for unmanufactured tobacco and support exporters by reducing the financial burden associated with the upfront payment of excise duties. The FBR’s initiative is expected to enhance compliance and facilitate smoother operations for the industry, promoting Pakistan’s tobacco exports in the global market.