KARACHI: The Petroleum and Customs External Audit of Auditor General of Pakistan has reported that abuse of schemes regarding duty free import of gold for the purpose of re-export after value addition caused a substantial loss to the national kitty to the tune of Rs2.706 trillion.
‘Entrustment’ and the ‘Self Consignment’ schemes were envisaged for the import of gold, for its subsequent export after converting it into value-added jewelry, without payment of normal import tariff subject to fulfillment of certain terms and conditions of the Schemes.
MCC Preventive Karachi cleared consignments of ‘Gold’ under PCT heading 9929.0000 with exemption from duty / taxes as per said SRO.
There have been serious apprehensions that these Schemes for duty-free import of gold are being abused by some importers and exporters and the national interest is being damaged.
The duty-free gold being was not being converted into value-added jewelry nor it was being exported causing loss to the national exchequer as exports were decreasing and imports were jumping.
It is pertinent to mentioned that in the year 2013, the import of gold into Pakistan, under these schemes witnessed an enormous surge, which is highly abnormal. During the January to June, 2013 gold worth Rs92.970 billion was imported compared to Rs19.132 billion in the same period in the year 2012.
The trend became even more alarming since in the first 26 days of July 2013, the import of gold under these schemes was to the tune of Rs52.549 billion.
The Entrustment Scheme provides export of jewelry and articles made thereof against imported precious metals supplied as partial advance payment, by the foreign buyer to the extent of the quantity of such precious metals to be used including wastage, in the manufacturer of the jewelry to be exported;
The quantity of precious metals imported under this scheme shall be capped at 25 kg on revolving basis; the precious metals imported under this scheme shall neither be sold in the domestic market nor used for any other purpose except to make and export jewelry to the supplier;
The exporters shall inform Trade Development Authority of Pakistan about precious metals imported against authorization duly attested by the customs in the Passbook within twenty one days; the foreign buyer, exporter or authorized representative shall be allowed to send by air or sea cargo or bring precious metals into Pakistan personally. However, he shall inform the customs authorities about arrival of precious metals under Entrustment Scheme including the identity of the person bringing consignment, arrival details such as flight number, time, airport or seaport etc.
The value-added would need to be exported with 120 days of import of gold.
Moreover, the self-consignment scheme was also abused. The scheme provides that the registered exporter shall apply to the Trade Development Authority of Pakistan (TDAP) for export authorization and such application shall be checked and verified by the TDAP and the entries shall be made in the Jewelry Pass Book;
The sale proceeds shall be realized within 120 days from the date of export. Minimum 50 percent of the export proceed shall be realized in the form of foreign exchange through normal banking channel;
The remaining 50 percent of the export proceed may be realized either in the form of foreign exchange or in the form of precious metals, authorization of import of such precious metals shall be authenticated in the passbook by TDAP;
The unsold jewelry or gemstones shall be deposited with the customs authorities and shall be cleared against relevant entries in Jewelry Pass Book for import of unsold jewelry or gemstones against previous authorization;
The Commercial Banks shall ensure that sale proceeds of Jewelry and gemstones exported under this Order shall be repatriated in full within 120 days otherwise commercial banks shall inform State Bank of Pakistan (SBP) as well as to TDAP. .
But the foreign exchange or gold matching the quantity of jewelry exports were not realized within 120 days.
The Audit has calculated that abuse of these schemes resulted in a loss of Rs2.7 trillion to the national exchequer.