EUS EXECUTIVE UPDATING SERVICE Updating Acts, Ordinances, Statutory Rules & Orders (SROs.) etc.

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1 EUS EXECUTIVE UPDATING SERVICE Updating Acts, Ordinances, Statutory Rules & Orders (SROs.) etc. III-H 11/21 NAZIMABAD P. O. BOX 2140 KARACHI Ph: (92-21) (NTN: ) EUS UPDATE SED ABOLITION & REFUND SPECIAL EXCISE DUTY (SED) (15 Pages/ ) For EUS Clients Use Only I. Descending Chronology of Special Excise Duty (SED) II. III. IV. Agricultural Tractor Parts SED Refund Notification Updated Version of SED Exemptions Notification Before Rescission SED Tractor Parts Exemption Notification Duly Superseded by SRO. 675 (I)/2011 ** * ** I. DESCENDING CHRONOLOGY OF SPECIAL EXCISE DUTY (SED) JULY 01, 2011 (Tractor Parts SED Refund) Exemption of SED levied under Notification SRO. 655 (I)/2007 dated , on the tractor parts supplied by registered vendors to the manufacturers of agricultural tractors, shall be available only by way of refund of SED paid by the manufacturers of agricultural tractors to their registered-vendors vide SRO. 675 (I)/2011 dated JUNE 20, 2011 (Certain Effect from ) Complete abolition of Special Federal Excise Duty on IMPORTS shall be effective from (Extract From FBR Press Release)

2 2 To incentives Trade & Industry in the country and also to reduce the burden of indirect taxation, the Federal Government, in the budget for financial year announced complete abolition of Special Federal Excise Duty and reduction of Sales Tax rate from 17% to 16% effective However, with a view to further facilitate the Trade & Industry in difficult times, it has been decided to give effect to these two measures on imports from Consequently, there will be no special excise duty on imports and the rate of sales tax on imported goods shall be 16% w.e.f For deemed to have been taken effect from for imports refer following paragraph/section 7(2) of the Finance Act, 2011 (XVI of 2011). JUNE 03, 2011 (Omission of SED Section 3A) Clause 12(2) of the Finance Bill 2011 Seeks to omit section 3A to reducing overall the scope of federal excise duty and completely eliminating special excise duty to reduce the burden of multiple taxation. Section 3A before omission read under certain EUS Footnote here in the document. Reference available under EUS DURE Budgetary Measures (Others). Subsequently vide following section 7(2) of the Finance Act, 2011 (XVI of 2011): (2) Section 3A shall be omitted provided in case of imports, such omission shall be deemed to have been made on 20 th June, 2011; JUNE 03, 2011 [Rescission of SED SRO. 655 (I)/2007] Federal Excise Section 3A SRO. 655 (I)/2007 dated , effective from , rescinded w.e.f vide Revenue Division s Budgetary SRO. 489 (I)/2011 dated [C. No. 1/28-STB/2011 signed by the Additional Secretary, Mr. Khawar Khurshid Butt], available under EUS DURE Budgetary Measures (Others). Before rescission, updated version of said notification may be reviewed here in this document. MARCH 19, 2011 (Increase in SED Rate to two and half % from one %) The words two and half for the word one in paragraph 1 of the preamble of relevant Notification was substituted by SRO. 261 (I)/2011

3 3 dated [C. No. 4/2-STB/2007 signed by the Additional Secretary, Mr. Khawar Khurshid Butt] ** * **

4 II. 4 AGRICULTURAL TRACTOR PARTS SED REFUND NOTIFICATION SRO. 675 (I)/2011 dated In exercise of the powers conferred by sub-section (2) of section 16 of the Federal Excise Act, 2005 and in supersession of S.R.O (I)/2007, dated the 18 th December, 2007, the Federal Government is pleased to exempt the special excise duty levied under Notification S.R.O. 655 (I)/2007, dated the 29th June, 2007, on the tractor parts supplied by registered vendors to the manufacturers of agricultural tractors falling under PCT heading 8701 of the First Schedule to the Customs Act, 1969 (IV of 1969), provided that exemption under this notification shall be available only by way of refund of special excise duty paid by the manufacturers of agricultural tractors to their registered-vendors and for the purpose of payment of such refund under this Notification, the procedure for refund shall, mutatis mutandis, be the same as applicable to the payment of refund of sales tax of a particular or relevant point of time. Provided that no refund shall be claimed by tractor manufacturers in respect of purchases on which Special Excise Duty was neither charged nor paid by the vendors due to any reason. However, no liability of Special Excise Duty shall be created against such vendor on this account and to the said extent. 2. This notification shall take effect from the 1st day of July, F. No. 3(3)ST-L&P/2010 Khawar Khurshid Butt Additional Secretary ** * **

5 III. 5 UPDATED VERSION OF SED EXEMPTIONS NOTIFICATION BEFORE RESCISSION SRO. 655 (I)/2007 dated In exercise of the powers conferred by 1 [section 3A], and sub-section (2) of section 16 of the Federal Excise Act, 2005, the Federal Government is pleased to direct that subject to the conditions, restrictions and exemptions stated hereinafter, special excise duty at the rate of 2 [two and half] per cent of the value shall be levied, collected and paid on goods specified in the First Schedule to the Customs Act, 1969 (IV of 1969) except the goods mentioned in the table below. S. NO. TABLE DESCRIPTION H.S. CODE (1) (2) (3) 1. All goods classifiable in chapter 07. Chapter OMISSION OF SECTION 3A - Before proposed omission by the Finance Bill 2011, Section 3A of the Federal Excise Act, 2005 read as follows [as earlier amended to increase the rate to two and half % for 1% by the Federal Excise (Amendment) Ordinance, 2011 dated ]: 3A. Special excise duty. (1) the Federal Government may, by notification in the official Gazette, levy and collect, subject to such conditions, limitations or restrictions as it may deem fit to impose, special excise duty on any, (a) (b) goods produced or manufactured in Pakistan; and goods imported into Pakistan; at the rate of [two and a half] percent of the value of such goods. (2) Special duty levied under sub-section (1) shall be in addition to any duty levied under section SED RATE INCREASE Substituted for the word one vide Revenue Division s SRO. 261 (I)/2011 dated [C. No. 4/2-STB/2007 signed by the Additional Secretary, Mr. Khawar Khurshid Butt]. Aforesaid substitution was earlier made in Special Excise Duty section 3A of the Federal Excise Act, 2005 vide the Federal Excise (Amendment) Ordinance, 2011 dated

6 2. Seeds, fruit and spores of a kind used for sowing 3. Rape or colza seeds, sunflower seeds, cotton seeds, sesamum seeds, mustard seeds and safflower seeds , , , , , , , , , , , and , , , , and Edible oils and fats 15.07, 15.08, 15.09, 15.10, 15.11, 15.12, 15.13, 15.14, 15.15, 15.16, and Petroleum oils and oils obtained from bituminous minerals, crude 6. Meat of bovine animals, sheep, goat and poultry 7. Cereals, rice and products of milling industry 8. Poultry feed and cattle feed including their ingredients , 02.02, and Chapter 10 and 11 Headings 9. POL products Natural gas and LPG ,

7 7 and Electrical energy Phosphoric acid Pharmaceutical products Chapter Fertilizers Chapter Currency notes, bank notes, shares, stocks and bonds Silver, in unworked condition , , , and Gold, in unworked condition , and Monetary gold and Tin plate and Computer hardware including laptops, notebooks, PCs mainframe and other peripheral units and parts thereof Soyabean seeds Petroleum bitumen Special classification provisions Chapter 99

8 24. Temporary importation under Federal Government s Notification No. S.R.O (I)/2005 dated 20 th October, 2005, imports under 3 DTRE Scheme and imports under manufacturing bonds scheme. 25. Goods specified in the Federal Government s Notifications No. S.R.O. 678 (I)/2004 dated the 7 th August, 2004, S.R.O. 509 (I)/2007 dated the 29 th June, 2007, S.R.O. 863 (I)/2007 dated the 24 th August, 2007, S.R.O. 549 (I)/2008 dated the 11 th June, 2008], (exemption shall be admissible in respect of S. No. 4, S.R.O. 551 (I)/2008 dated the 11 th June, 2008 at S. No Supplies made by cottage industry as defined in the Sales Tax Act, Goods produced or manufactured and exported by a manufacturer 28. Imported goods subject to customs duty at the rate of zero percent under the Customs Act, 1969 (IV of 1969), or any notification issued thereunder. 8 headings headings headings headings headings 29. Table salt including iodized salt Glass bangles Newspapers, journals, books and periodicals , , , , , and DTRE - Read under EUS DUREs DTRE Scheme & Customs Rules.

9 9 32. Bricks and building blocks of cement and Agricultural tractors Headings 34. Supplies made against international tenders Headings 35. Live animals Headings 36. Eggs including eggs for hatching and Breads, vermicillies, nans, chapattis, sheer mal, bun, rusk 38. Tractors parts supplied by registered vendors to manufacturers of agricultural tractors subject to the conditions and procedure specified in 4 [Notification No. S.R.O. No (I)/2007 dated the 18 th December, 2007]. 39. Steel ingots and billets and mild steel products which are chargeable to sales tax under rules 58H and 58Ha of the Sales Tax Special Procedure Rules, Headings headings of Chapter Pesticides , Coal mined, produced or extracted by any method from Thar Coalfield Conditions and restrictions: 4. AGRICULTURAL TRACTORS PARTS FED exemption with reference to S. No. 38 vide SRO (I)/2007 dated effective from has been superseded by SRO. 675 (I)/2011 dated Both the Notifications available here in EUS DURE.

10 (i) 10 The value for the purposes of levy of special excise duty shall be, (a) (b) in case of goods imported, the value determined in accordance with section 25 of the Customs Act, 1969 (IV of 1969) for the purpose of assessing customs duty; and in case of goods produced or manufactured, the value determined under sub-section (1) or as the case may be sub-section (4) section 12 of the Federal Excise Act, 2005, excluding the amount of excise duty levied under section 3 of the said Act. (ii) Special excise duty and such duty shall be paid, (a) (b) in case of goods imported, in the same manner as customs duty is paid by an importer under the Customs Act, 1969 (IV of 1969); and in case of goods produced or manufactured, in the same manner as Federal excise duty is paid by a producer or manufacturer under the Federal Excise Act, (iii) (iv) (v) (vi) The amount of special excise duty shall not be part of the value for the purpose of assessment of customs duty, Federal excise duty, sales tax or advance income tax, in case of imported or locally manufactured goods. Special excise duty paid at import or local supply stage on industrial inputs shall be adjustable against the special excise duty chargeable on the goods manufactured therefrom at local supply stage. No other adjustment of special excise duty shall be allowed against any amount of Federal excise duty or sales tax or any other tax and vice versa; Where goods on which special excise duty has been paid are exported, the exporter shall be entitled to drawback of such duty in such manner and to such extent as may be directed by the Board ;and 1% SED already charged to buyers on local supply of pesticides, specified under S. No. 40 of the Table on or after 29 th June, 2007, shall be refunded only, if the incidence of tax is

11 11 not passed to the consumer in terms of section 11 of the Federal Excise Act, This notification shall take effect on and from the 1 st day of July, ** * **

12 IV. 12 SED TRACTOR PARTS EXEMPTION NOTIFICATION DULY SUPERSEDED BY SRO. 675 (I)/2011 SRO (I)/2007 dated In exercise of powers conferred by sub-section (2) of section 16 of the Federal Excise Act, 2005, the Federal Government is pleased to exempt the special excise duty levied under Notification No. S.R.O. 655 (I)/2007, dated the 29 th June, 2007, on the tractor parts supplied by registered vendors to the manufacturers of agricultural tractors falling under heading No of the First Schedule to the Customs Act, 1969 (IV of 1969) subject to the following conditions, namely: 5 [(i)] 6 [(ii)] 5. VENDORS Following condition (i) omitted by SRO. 205 (I)/2008 dated : (i) the exemption under this notification of special excise duty paid by, a recognized manufacturer of agricultural tractor registered under the Federal Excise Act, 2005, to the registered vendors of tractor parts, shall be allowed only by way of refund; Vendors Franchise Services Read with following FED exemption: SRO. 185 (I)/2008 dated In exercise of the powers conferred by sub-section (2) of section 16 of the Federal Excise Act, 2005, the Federal Government is pleased to exempt whole of Federal Excise Duty on franchise services falling under PCT heading payable by the vendors of the auto parts industry having Technical Agreements with foreign based auto parts manufacturing companies. [C.No.1(3)FED/2007 signed by the Additional Secretary, Revenue Division, Mr. Mehmood Alam] 6. AGRICULTURAL TRACTOR MANUFACTURERS Following condition (ii) omitted by SRO. 205 (I)/2008 dated [Gaz. P-II(I)/p. 488]: (ii) the registered manufacturer of agricultural tractor shall claim the refund of special excise duty paid to vendors on the parts actually used in the supply of tractors in a tax period. The manufacturer shall file the refund application to the Collector of Federal Excise having jurisdiction along with following documents, namely: (a) invoices showing payment of special excise duty;

13 13 (iii) (iv) the refund claim 7 [of special excise duty] shall be processed in the same manner as provided under the Refund Claim of Recognized Agriculture Tractor Manufacturers Rules, 2005; and the relevant provisions of Chapter V of the Sales Tax Rules, 2006 shall apply. However, one time waiver from 8 [rule 28 (1)] is granted in respect of refund claims arising out of supplies made before the issuance of this notification subject to the condition that the same are filed before the 31 st January, This notification shall apply to all supplies made on or after 1 st July, (b) (c) sales tax-cum-federal excise returns filed by the manufacturers of tractors and his registered vendors; a revolving bank guarantee valid for at least ninety days issued by scheduled bank to the satisfaction of Collector of Federal Excise having jurisdiction of an amount not less than the average monthly refund claim during last twelve months; and (d) undertaking to the effect that refund if found not due shall be adjusted against the bank guarantee; 7. SED CLAIM In clause (iii), after the word claim occurring for the first time, the words of special excise duty inserted vide SRO. 205 (I)/2008 dated SALES TAX RULES, 2006 Rule 28(1) read as follows: 28. Filing of refund claim. (1) Monthly sales tax return filed by a claimant shall be treated as a refund claim once all the supportive documents including the requisite data in the format or software (RCPS), has been received: Provided that no refund claim shall be entertained if the claimant fails to furnish the claim on the prescribed software (RCPS) along-with the supportive documents within sixty days of the filing of return. Provided further that the period of sixty days as aforesaid, in case of a commercial exporter, shall be reckoned from the date when the BCA is issued to him by the concerned bank. EUS Note. RCPS means the Refund Claim Preparation Software prescribed by the Board [ST Rule 2(xl)].

14 14 [C.No.1(3)FED/2007/Gaz. P-II(I)/p. 5210] (Mehmood Alam) Additional Secretary ** * **

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