In a move that could have significant implications for exporters, the Federal Board of Revenue (FBR) is contemplating the prohibition of drawback against goods exported to specified foreign territories.
This potential development stems from Section 64 of the Sales Tax Act, 1990, as updated up to June 30, 2021, which grants the Federal Government the authority to declare certain goods as identifiable and to restrict the payment of drawback on their exportation to specific foreign ports or territories.
The Sales Tax Act, 1990 underwent amendments through the Finance Act, 2021, and the latest focus on Section 64 brings attention to the government’s efforts to streamline and regulate the exportation of goods. The Act empowers the Federal Government to issue notifications in the official Gazette, outlining the prohibition of drawback payments in the context of specified foreign territories.
The move aims to enhance oversight and control over the exportation of goods, preventing potential misuse or fraud in the claim of drawbacks. By specifically identifying goods or classes of goods and designating certain foreign territories, the government seeks to address concerns related to revenue leakage and ensure a fair and transparent system.
Section 64 reads, “The Federal Government may, from time to time, by notification in the official Gazette, prohibit the payment of drawback upon the exportation of goods or any specified goods or class of goods to any specified foreign port or territory.”
This provision empowers the FBR to adapt to changing economic conditions, international trade dynamics, and emerging challenges. Prohibiting drawback payments for specific goods to designated foreign territories could be a strategic move to safeguard the interests of the national economy, prevent revenue loss, and curb potential malpractices in the export sector.
While the exact criteria for identifying goods and territories under consideration remain undisclosed, industry stakeholders and exporters are closely monitoring the developments. The business community is likely to seek clarification on the criteria for the prohibition of drawback payments and express their concerns about the potential impact on export operations.
The proposed measure aligns with the government’s broader efforts to reform and modernize the taxation system, ensuring compliance with international standards and promoting fair trade practices. However, it also raises questions about the potential challenges exporters might face, especially those dealing with goods commonly exported to specific foreign territories.
As the FBR contemplates this regulatory change, industry players are calling for transparency in the decision-making process and meaningful consultation with relevant stakeholders. Balancing the need for enhanced oversight with the facilitation of legitimate trade remains a crucial aspect of any such regulatory initiative.
The FBR’s consideration of prohibiting drawback payments on goods exported to specified foreign territories, as outlined in Section 64 of the Sales Tax Act, 1990, underscores the government’s commitment to strengthening regulatory mechanisms in the realm of international trade. The implications of this potential move will be closely watched by businesses and industry experts, who await further details on the criteria and the overall impact on the export landscape.
