In the Name of Allah, the Most Beneficent, the
Most Merciful
OUR TOPIC TODAY
“Customs related procedures on export
of goods and Revamped DTRE Scheme
in the context of Engineering Sector.”
What is the DTRE Scheme?



Duty & Tax Remission for Exports.
Allows for import AND local procurement of
inputs without payment of customs duty,
excise duty, sales tax and withholding tax.
Facility available only for use in
manufacture of goods meant for export.
the
Where can we find the DTRE Rules?


These Rules are a part of the Customs
Rules,
2001
notified
vide
SRO
450(I)/2001 dated 18.06.2001.
DTRE Rules begin at Rule 296 and end
at Rule 307 in the above mentioned
Customs Rules. (Only 12 Rules in total).
WHAT DO THESE RULES EXPLAIN

Rule 296 – Definitions.

Rule 297 – Scope of the DTRE facility.

Rule 298 – Application for DTRE Approval.

Rule 299 – Input-Output ratios & wastages.

Rule 300 – Grant of DTRE Approval.
WHAT DO THESE RULES EXPLAIN-2

Rule 301 – Amendment, suspension
cancellation of DTRE Approval.
or

Rule 302 – Acquisition of duty-free inputs.

Rule 303 – Acquisition of duty-paid inputs.

Rule 304 – Acquisition of locally made inputs.

Rule 305 – Utilization of input goods.
WHAT DO THESE RULES EXPLAIN-3

Rule 306 – Export of manufactured goods.

Rule 307 – Exports to Afghanistan.

Rule 307A – Unaccounted un-exported goods.

Rule 307B – Refund of Sales Tax.

Rule 307C – Records and documents.
WHAT DO THESE RULES EXPLAIN-4

Rule 307D – Reconciliation Statement.

Rule 307E – DTRE Audit.


Rule 307F – Power to suspend DTRE
facility.
Rule 307G – Miscellaneous.
WHAT needs to be done to start
using the DTRE Facility



Get registered with the Sales Tax Department
through your local Sales Tax Collector.
Apply over the web through PACCS
(www.paccs.gov.pk) to your local Sales Tax
Collector by filling out the form appended with
the DTRE Rules.
Also declare the input-output ratios &
wastages of your products as per the
appended form.
Some Caution & Some Security


Before granting you a DTRE Approval, the Collector
may need to verify your production capacity &
business turnover from your Sales Tax Profile to
ensure that the quantity of input goods applied for is
commensurate with your actual production and
business capacity. He may also consult the records of
IOCO to ensure that ratios & wastages claimed are as
per industry standards.
If the Collector is satisfied with your bona fides, he
shall issue you a DTRE Approval & secure the
suspended duty & taxes against prescribed security
instruments, which you have to furnish.
How to Proceed Further & Acquire
Input Goods



Once you have the Approval, you can now freely import/acquire
duty-free inputs. Local inputs are to be reported by you to the
Regulatory Collector to be fed into PACCS while imported inputs
are fed into PACCS by the Customs staff at the port of import.
You can also now acquire duty-paid input goods for which you
can later claim duty drawback as per the relevant duty drawback
notification.
If you acquire inputs from registered person, then he is liable to
issue you a zero-rated invoice under section 23 of the Sales Tax
Act, mentioning therein your Approval No. & date.
How Much Time do you have to
Utilize the Input Goods


You now need to utilize those inputs
goods within eighteen months from the
date of acquisition.
After utilization, you can now export
your goods by filing a Bill of Export or
Goods Declaration mentioning therein
the Approval No. & date.
WHAT to do now that Export has
taken place


Within sixty days of the expiry of the
utilization period, or even earlier, after export,
you will have to file a reconciliation statement
with the Regulatory Collector.
The Collector will then carry out a postexportation audit of your record & if you have
fulfilled your obligations, your security
instruments would be released.
WHAT RECORDS ARE TO BE KEPT &
MAINTAINED BY THE DTRE USER

Copies of DTRE applications and DTRE approvals.

Records of acquisitions of input goods and exports.


Record for destruction or other authorized disposal of
input goods and output goods.
Export contracts or orders and supply contracts or
orders.
WHAT GOODS ARE NOT WITHIN THE
AMBIT OF DTRE SCHEME
The DTRE facility is not admissible to:

o
o
Polyester Staple Fiber (PSF), Pure Terephthalic Acid
(PTA), Raw Sugar, Cooking Oil or Vegetable Ghee
or their raw materials.
Goods which are banned or restricted under the
Import & Export Policy Orders on account of
national security, public health and cultural, moral
or religious considerations.
Export Facilitation Provisions in the
DTRE Rules-1



Allow the import AND local procurement of all input
goods needed for exports production, without payment
of customs duty, central excise duty, advance income tax
and sales tax.
Such duty-free imports and local procurement are
available to direct as well as indirect exporters.
The indirect exporters are those who provide input
goods or services to direct exporters for the purpose of
export production.
Export Facilitation Provisions in the
DTRE Rules-2

A wider definition of the term “export” that includes any
supply of goods:
o
By an indirect exporter to a direct exporter;
o
Against international tenders;
o
o
To projects or sectors entitled to import or purchase such goods
free of duties and taxes; and
To Export Processing Zones.
Export Facilitation Provisions in the
DTRE Rules-3

A wider definition of the term “input goods” that
not only includes services but also:
o
o
o
Trims and accessories;
Electricity and gas on which sales tax has been paid;
and
Furnace or diesel oil for the generation of electricity
used or consumed in the manufacture of export
goods.
Export Facilitation Provisions in the
DTRE Rules-4

A wider definition of the term “import” to
include:
o
o
Purchase of inputs from EPZs.
Purchase of inputs from a Private or Public Bonded
Warehouse including Manufacturing Bond.
Export Facilitation Provisions in the
DTRE Rules-5

DTRE Scheme has been granted wide applicability and is
available to:
o
o
o
o
All persons registered as exporter under the Sales Tax Act, 1990.
All commercial exporters engaged in the purchase and export of
same-state-goods.
All contracted vendors of foreign manufacturers or foreign
buyers.
All persons who make value-addition in the manufacture and
export of goods.
Export Facilitation Provisions in the
DTRE Rules-6

DTRE Approval can be sought on the basis of:
o
o
o
Specific export or supply contract or order.
Past export performance substantiated vide Bills of
Export or e-Forms or Sales Tax Returns for the past
two years.
Past supplies to direct or commercial exporters (in
case of indirect exporters).
Export Facilitation Provisions in the
DTRE Rules-7


A consolidated DTRE Approval can be sought by
an indirect exporter who has more than one
Supply Contract/Purchase Order from a direct or
commercial exporter.
Tags and printed materials supplied by a foreign
supplier without involvement of foreign
exchange from Pakistan are allowed to be
imported without any quantitative restriction.
Export Facilitation Provisions in the
DTRE Rules-8

A flexible regime of security instruments in lieu
of suspended duty & taxes:
o
o
o
Indemnity bond alongwith the post-dated cheque
from a direct and indirect exporter;
Bank guarantee from a commercial exporter; and
Corporate guarantee from exporters in the corporate
sector.
Export Facilitation Provisions in the
DTRE Rules-9


Where export under a separate contract can not
be arranged out of regular production due to
valid reasons, past export performance as well
as contract-based DTRE Approval may be
granted concurrently for the output goods of the
same or different description.
No DTRE application can be rejected without
affording a hearing opportunity to the applicant.
Export Facilitation Provisions in the
DTRE Rules-10


A DTRE user may apply to a Regulatory Collector
for amendment in the previous Approval or for
its cancellation and each such request has to be
decided within ten days.
No request for a cancellation of, or amendment
in, an existing DTRE Approval can be rejected
without affording a hearing opportunity.
Export Facilitation Provisions in the
DTRE Rules-11


The Regulatory Collector may allow a DTRE user to
utilize his duty-free acquired input goods for his new
Approval if his previous DTRE Approval has been
cancelled due to pre-mature termination or cancellation
of the export or supply contract or if such input goods
have been rendered surplus for any valid reason.
A DTRE user is entitled to claim duty drawback on
acquisition of duty-paid input goods subject to the
applicable duty drawback notification after full discharge
of the liabilities and obligations.
Export Facilitation Provisions in the
DTRE Rules-12

A DTRE user may, with the permission of the Regulatory Collector, dispose
of the input goods or output goods within the prescribed utilization period
in the following manner, namely:
o
Return to person who had supplied the input goods.
o
Sale, by a DTRE user to another DTRE user for export.
o
o
o
Local sale (upon permission by the Collector) on payment of duties and taxes
leviable at the time of such sale
Destruction after approval of the Regulatory Collector if goods are not fit for
consumption or sale with remission of duty and taxes.
Local sale of B-grade products, factory rejects or wastage on payment of leviable
duties and taxes.
Export Facilitation Provisions in the
DTRE Rules-13

Refund of sales tax on electricity or gas or
services utilized as input goods for DTRE
purpose shall be admissible to a DTRE
user as admissible under the Sales Tax
Act, 1990 if the value of tax paid inputs
other than electricity, gas and services
does not exceed 20% of the total value of
the DTRE approval.
DTRE SCHEME & THE PROBLEMS
OF ENGINEERING SECTOR - 1
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

The Approval procedure is lengthy and
complicated.
Utilization period of 18 months is too
short.
PDCs and IBs remain stuck due to
delayed audits.
DTRE SCHEME & THE PROBLEMS
OF ENGINEERING SECTOR - 2



Local suppliers of inputs avoid issuing
zero-rated invoices.
Input-output ratios are not correctly
determined.
The necessity to apply via PACCS
increases the access time to DTRE.
The Approval procedure is lengthy and
complicated.
A question of balance between quickness and
compliance formalities prescribed by rule 300.

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

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


Bona fides of the applicant.
Feeding the Approvals into PACCS.
Securing of suspended duty & taxes through IB/BG/CG from
direct/indirect, commercial exporters or corporate exporters
respectively.
Verification of production capacity/business turnover to
ensure that import is commensurate with capacity.
Verify input-output ratios & wastages are as per industry
standard. Collector may have to consult IOCO in this regard.
Details of past exports performance or the Contract or both
need to be verified.
In case of rejection, hearing opportunity has to be afforded.
Utilization period of 18 months is
too short.


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18 months is from the date of acquisition not
Approval.
Rule 305 provides for further extension by the CBR.
CBR is liberal in granting extensions in individual and
deserving cases.
However, blanket extension in the utilization period
will give rise to compliance issues.
PDCs and IBs remain stuck due to
delayed audits.


Some onus on the DTRE users because, as
per rule 307E, post-exportation audit has to
be completed within a period of twelve
months after expiry of the utilization period or
after filing of the reconciliation statement
within sixty days of the expiry of the
utilization period, whichever is earlier.
However, in specific cases, users are free to
approach CBR if there is delay beyond the
specified period.
Local suppliers of inputs avoid issuing
zero-rated invoices.



The apparent reason for this is that local
suppliers want to hide the quantum of their
business by avoiding documentation.
The solution is to identify and report to the
Collector or CBR any and all such instances.
Rule 304 (2) caters to registered suppliers;
hence, the reporting will lead to action.
Input-output ratios are not correctly
determined.


Sales Tax staff is not supposed to be experts on ratios &
wastages. They simply know the law & procedures.
Under rule 300 (3) (b), the Collector is free to consult the record
of IOCO to ensure that ratios & wastages claimed are as per
industry standards.

Users are free to disagree and can ask the Collector for a referral
to the EDB.

Collector is free to avail any forum to establish the bona fides of
a DTRE applicant and application.

Problems in ratio determination can be communicated to CBR,
which can take up specific cases with the Collector.
The necessity to apply via PACCS
increases the access time to DTRE.

PACCS has been established in the larger economic interest.

Identify & specify the problems and let CBR know so that these can be
rectified.


Before PACCS, DTRE users had to import goods through one particular
port because a paper based register was maintained only at one
particular Customs station. Since quota debiting was involved, the
goods had to travel to the port where the register was placed before
clearance could be allowed by Customs. Thus users were incurring
transportation cost.
All registers are electronic in the PACCS environment and are available
online to all Customs formations. With PACCS e-registers, businesses
are free to clear their cargo from any convenient port.
Thank You