CENTRAL BOARD OF REVENUE

(EXPORTS WING)
******

AN EMINENTLY ACCEPTABLE DTRE SCHEME

The new look DTRE scheme provides a genuine opportunity to the exporters to opt out

from the hassle of seeking refunds from the customs and sales tax departments.

2. Earlier, response of the exporters to the No-duty-No-Drawback scheme envisaged in

DTRE Rules first promulgated in March 2001 was lukewarm on account of many real and perceived

difficulties. Several facilitation features were notified in November 2002 but the response remained poor.

3. All pending issues were thoroughly discussed with all stakeholders. Eventually all these

difficulties have been alleviated in the Budget for FY 2003-04.

4. All responsible stakeholders now agree that the modified DTRE rules provide a very

credible solution to the problems of exporters.

5. The completely re-vamped DTRE scheme provides the following facilities for the

exporters;

• Input adjustment for GST made available on electricity and gas;

• Movement of duty and tax free input goods is permitted between the DTRE approved
persons;

• DTRE manufacturer can get their export goods manufactured from anywhere as long as
such vendor/agent is a sales tax registered person.

• Sale of admissible wastages is also allowed under DTRE on payment of leviable sales
tax;

• Polyester staple fibre (PSF), which is a most significant component of value

added textiles has been included in the DTRE scheme;

• Compensatory duty drawback is admissible under DTRE on locally procured PSF

on deemed import basis;

• As a result, exporters have the choice of importing PSF or buying it locally.

• Duty drawback is admissible to the extent of 10% of total input requirement on

local purchases. This limit can be increased for specific goods on the recommendation of
Export Promotion Bureau;

• The admissibility of DDB upto 10% of notified rate for specific items releases the
exporters from the difficulty of having to obtain 100% of his requirement under the DTRE
regime. Now exporters can procure goods upto 10% of contract value from local market and
get DDB. Thus, buttons, threads, beads, zips, eye-lets, collar-bones, wrapping & packing
materials, dyes, glues, buckles, etc. etc. etc can be procured from non-DTRE resources.
• An exporter can opt for the DTRE for Sales Tax alone in which case he will be
entitled to full DDB on duty-paid inputs;

• Limit for export performance has been reduced from 500,000 US$ to 100,000
US$ to accommodate small and medium size manufacturers-cum-exporters under DTRE.

• An exporter can establish his performance by presenting EE Form verified by the

State Bank of Pakistan even if he does not have a complete record of shipping bills;

• Permission to cover supplies against international tenders under DTRE enables

the local manufacturers to bid on competitive basis;

• Enhancement in the period of initial utilization of inputs from twelve months to

eighteen months saves the exporter from penal surcharge. Computation of utilization period
will be done from the date of procurement instead of the date of DTRE approval;

• Ceiling for sale of B-Grade material or factory-rejects enhanced to 20%;

• Penal surcharge limited to value of unutilized inputs instead of value of unfulfilled

exports. Penalty on over-stayed goods has, thus, been reduced;

• Input goods can now be procured under DTRE against an “export purchase
order”. Exporter need not necessarily have a confirmed contract;

__________________________________
 SUB-CHAPTER 7

DUTY AND TAX REMISSION FOR EXPORTS

296. Definitions.- (1) In this sub-chapter, unless there is anything repugnant in the subject or
context,-
(a) “Act” means and includes the Customs Act, 1969 (IV of 1969), section 37 of the
Central Excise Act, 1944 (I of 1944), section 50 of the Sales Tax Act, 1990, and
sub-section (I) of section 165 of the Income Tax Ordinance, 1979 (XXXI of 1979)
(b) “Appendix” means an Appendix to this chapter;
(c) “exporter” means a registered person, export house or indirect exporter engaged
in or intending to engage in export of goods;
(d) “export house” means a trading company registered as an export house;
(e) “indirect exporter” means a person who has a firm contract or export purchase
order from a direct exporter for manufacture and supply of goods for export to the
direct exporter; and
(f) “input goods” mean all goods imported or procured locally including electricity
and gas for manufacture and export under this sub-chapter.
(g) “applicability” for the purposes of this sub-chapter means and
includes exporters, indirect exporters, and export houses for-
(i) goods imported under the Import Policy Order for the time being in force,
including banned and restricted items, excluding pure terephthalic acid
(PTA) and raw sugar, that may be procured without payment of customs
duty, excise duty, sales tax and withholding income tax;

(ii) goods or supplies purchased or procured locally without payment of sales

tax, excise duty and withholding income tax;

(iii) electricity and gas on which sales tax has been paid; and

(iv) supplies against international tenders.

297. Procurement of input goods.- (1) An exporter shall furnish an application in the form as
set out in Appendix 1, to the Collector of Customs, within whose jurisdiction the head office of the exporter
is located, alongwith the following, namely :-

(i) list of goods he intends to supply for export or export directly alongwith the
description, quantity and value of the input goods, to be imported or purchased
locally for use in the manufacture of goods for export. However, DTRE exporter
whose performance corresponds to the performance criterion as per sub-
rule (4), shall be required to give description and value of goods in
application for set out in Appendix-1.
(ii) input to output ratio calculated by the exporter for conversion of input goods into
manufactured goods for export alongwith particulars of the anticipated wastage;
and
(iii) export contract or export purchase order in respect of the goods declared in
clause (i).

(2) The Collector of Customs shall allow the delivery of input goods without payment of any
duties and other taxes to manufacturer-cum-exporters against an indemnity bond or post-dated cheque
covering duties and tax liability on the input goods to be procured under clause (i) of sub-rule (1),
submitted along with the application for DTRE approval and Appendix-1 if the Collector is satisfied as
to the bonafides of the applicant.
 (3) The Collector of Customs shall allow the delivery of input goods without payment of any
duties and other taxes to commercial exporters against an irrevocable bank guarantee covering duty and
tax liability on the input goods to be procured under clause (i) of sub-rule (1), submitted along with the
application for DTRE approval and Appendix-1 if the Collector is satisfied as to the bonafides of an
applicant.

(4) If a direct exporter can demonstrate a record of export business, through the presentation
of bills of export or EE form duly countersigned by the State Bank of Pakistan for the general class of
product concerned corresponding to the PCT Chapter Headings, stretching over the previous twenty-four
months with a minimum export value in each of the two successive twelve months periods equivalent to
one hundred thousand US dollars he shall be entitled to request approval for importation and domestic
sourcing free of all duties and taxes of a quantity of inputs equivalent to the maximum export production
requirements in any consecutive six months period in the previous twenty-four months. Such approval may
be given without reference to particular confirmed export orders or letters of credit subject to the fulfillment
of the provisions of clause (i) and (ii) of sub-rule (1) of rule 297. The total amount of duties and taxes
waived shall be covered by an appropriate indemnity bond or insurance guarantee or bank guarantee,
submitted at the time of seeking approval, provided that there be no adverse or criminal record against
him in the previous twenty-four months.
(5) (i) An indirect exporter making an application under this chapter, in the form as set
out in Appendix 1, shall enter the approval number of application of a direct
exporter with whom he must have a valid contract. On approval, the indirect
exporter shall have the same duty suspension privileges as the direct exporter
within the duty suspension allowance of the direct exporter. The direct exporter,
entitlement to duty suspension shall be reduced to the extent of the entitlement of
the indirect exporter.
(ii) A DTRE approved exporter may procure imported input goods free of duties
and taxes from a DTRE approved person on approval from the Collector of
Customs granting DTRE approval to the exporter.

(6) An exporter may get his finished goods manufactured, from any person registered
under the Sales Tax Act, 1990, from anywhere in Pakistan.

(7) Any input goods produced in excisable premises may be procured by an exporter without
payment of excise duty against the AR prescribed under the Central Excise Rules, 1944. The prescribed
AR shall stand discharged on production of an audited bill of export.

(8) Any purchase of input goods from domestic suppliers by an exporter under this sub-
chapter, being zero-rated shall be free of sales tax.
 (9) An approved exporter may apply to Collector of Customs for amendment in the
previous approval or for its cancellation which shall be allowed within ten days of receipt of such
request or application.

(10) At the time of applying for DTRE approval, the exporter already having with him
duties and taxes paid raw materials and finished goods inventories at their premises, shall declare
the same to the DTRE approving authority.

297-A. Local procurement of duty paid input goods.- (1) At the time of furnishing an
application for DTRE approval, an exporter shall declare in a separate form Appendix - 1(A), the
description, quantity and value of input goods intended to be procured locally for which the said
exporter desires to claim duty draw back.

(2) The input goods mentioned in Appendix-1(A) shall not be included in the list of
input goods mentioned in Appendix-1 for duty and tax-free imports.

(3) The value of input goods as declared under sub-rule (1) in Appendix-1(A) shall not
exceed 10% of the total value of input goods or such percentage as may be specified by the Export
Promotion Bureau for specific goods as declared in Appendix-1.

(4) The duty drawback on locally manufactured polyester staple fibre procured on
deemed import basis shall be admissible without ceiling.

(5) The applicant shall provide the following information on input goods in the Appendix-
1(A), namely:-
(a) the number of operative notification under which he will claim duty
drawback on the items specified in Appendix-1(A);

(b) the apportioned rate of duty drawback on input goods in Appendix-1(A);

and

(c) the approximate amount of duty drawback on the basis of input output
co-efficient determined by IOCO on input goods in Appendix-1(A).

(6) The duty drawback on the input goods specified in Appendix-1(A) shall be
admissible only after an exporter has fully discharged his liability as accepted under rule 297.

297-B. Procurement of sales tax free input goods.- An exporter may furnish an application
in the form as set out in Appendix-1(B) for remission of sales tax alone in which case he shall be
entitled to procure sales tax free input goods and will be entitled to full duty drawback on his duty
paid input goods and the provision of the DTRE rules shall, mutatis mutandis, also apply for input
goods procured under this rule:
 Provided that the facility of sales tax free purchase or supply of input goods shall
be available only to those sales tax registered persons who maintain all the records
prescribed under these rules or under the relevant Act in the computer software duly
prescribed or approved by the Central Board of Revenue.

298. Utilization period of input goods.- The input goods shall be utilized in production and
export within eighteen months from the date of import or local procurement, whichever is earlier, of
the approved input goods or a part thereof, which period shall be automatically extended upon request,
once only, up to a further period of six months on payment of one per cent per month of the f.o.b value of
un-utilized input goods as per contract or export purchase order in clause (iii) of sub-rule (1) of rule
297 or one per cent per month of the value of un-utilized input goods during the six months period
referred to in sub-rule (4) of rule 297. The utilization period shall, in no case, be extended beyond twenty-
four months. Inputs whether imported or locally purchased not consumed within eighteen months
shall be subjected to payment @ 2% per month of the value of un-utilized input goods.

299. Export of manufactured goods.- (1) An exporter shall file a separate bill of export for
each consignment under this sub-chapter and all the formalities of processing and examination of export
goods, for the time being in force, shall be observed.

(2) A bill of export filed under sub-rule (1) shall be endorsed “Export under Duty and Tax
Remission for Export under Customs Rules, 2001”.

(3) Where locally produced input goods procured under sub-rule (8) of rule 297 are used in
the production of finished goods a declaration to that effect shall be made on the bill of export.

(4) Exports under this sub-chapter shall be admissible to all countries including Afghanistan
and through Afghanistan to Central Asian Republics by land route subject to conditions contained in
paragraph (8) of the Export Policy and Procedure Order, 2000.

300. Unaccounted or un-exported goods.- (1) If any exporter fails to give proper and
documented account of the duty and tax free input goods or of the un-exported finished goods
manufactured therefrom to the auditors at the time of audit, the exporter shall be required to pay the
duties, taxes and penalties leviable on such goods.

(2) An exporter may transfer his duty and tax free input goods to another DTRE
approved exporter of the same goods. The input goods so obtained shall be utilized as per rule
298.

(3) An exporter may dispose of unutilized input goods other than banned items, in
local market, on payment of surcharge as per table give below in addition to the liable duties, taxes
and payment under rule 298.
 TABLE
---------------------------------------------------------------------------------------------------------
S.No. Quantity of unutilized Surcharge
Input goods
---------------------------------------------------------------------------------------------------------
1. Less than 10% of unutilized Nil
input goods.

2. From 10% to less than 20 % of 1% of f.o.b. value of

unutilized input goods. unutilized input goods.

3. From 20% to less than 30 % of 2% of f.o.b. value of

unutilized input goods. unutilized input goods.

4. More than 30% of 3% of f.o.b. value of

unutilized input goods. unutilized input goods.

(4) An exporter may dispose of the banned unutilized input goods subject to the
approval of the Ministry of Commerce, on payment of surcharge as per table given above in
addition to the leviable duties, taxes and payment under rule 298 and on conditions prescribed by
the Ministry of Commerce in this regard.

(5) An exporter may sell his admissible wastages in the local market on payment of
sales tax leviable thereon.

(6) An exporter may sell his B-grade products and factory rejects only upto 20% of the
exports as per contract under rule 297 on payment of duties and taxes leviable on the finished
goods in addition to the surcharge as per rule 298 subject to the provisions of the Import Policy
Order.

301. Destruction of goods.- Any goods that are unfit for consumption or sale shall be allowed
to be destroyed in such manner as may be specified by the Collector of Customs.

302. Remission of duties and taxes.- Subject to satisfaction of the Collector of Customs, the
duties and taxes, if any may be remitted in full in the cases when any goods are damaged or destroyed by
unavoidable circumstances or for causes beyond the control of an exporter or when the goods are
destroyed in accordance with rule 301.

302A. Refund or adjustment of sales tax.- Refund or input adjustment of sales tax paid on
electricity and gas shall be allowed to the DTRE approved exporter to the extent of proportionate
consumption thereof in the production of exported goods.

303. Records and documents.- (1) An exporter shall keep and maintain at his place of
business detailed books and records relating to the purchase, importation, stocks of goods, production,
packing, sales, shipping and exportation of all goods for a period of five years after the export of finished
goods.
 (2) Separate books and records shall be maintained for stocks of imported goods, indirect
imports and indirect exports from those maintained for domestic goods.

(3) Every page in the records maintained under sub-rule (1) and (2) shall be initiated either by
an authorized representative designated by a director of the company or owner himself.

304. Reconciliation statement.- On the expiry of the period specified in rule 298, or earlier
after export, an exporter shall file a reconciliation statement in the form as set out in Appendix-2 specifying
the quantities of input goods used in the production of goods for export, the quantities exported, the input
to output ratio relating to each export consignment, the quantity of input goods not used in the production
of goods for export and the duties and taxes leviable thereon.

305. Post-exportation audit.- The liability of an exporter to pay duty and taxes under this sub-
chapter, as accepted under rule 297 shall be fully discharged subject to a post-exportation audit which
shall be carried out and completed normally within a period of twelve months after the period specified in
rule 298. The audit shall be a combined audit and shall cover all the duties and taxes for which the
indemnity bond, bank guarantee or insurance cover has been filed.

305A. Power to adjudicate.- As a result of post-exportation-audit, if there arises any

discrepancy, irregularity or any violation of the rules by the DTRE approved exporter, the same
shall be reported to the adjudication officer empowered by the Central Board of Revenue, for
adjudication, in this regard.

306. Power to deny facility.- In case of misuse of any facility under this sub-chapter by any
manufacturer-cum-exporter or commercial exporter the facility may be denied on the recommendation of
the respective Association.

307. Power to suspend.- Application of rules under this sub-chapter may be suspended by
the Central Board of Revenue, by notification in the official Gazette, in respect of any particular sector of
group of product.
 GOVERNMENT OF PAKISTAN
(REVENUE DIVISION)
CENTRAL BOARD OF REVENUE
****

C. No. 4(8)TEPI/2001 Islamabad, the 7th April, 2003

To:

1. Chairman, 4. President,
Export Promotion Bureau, FPCCI, Karachi
Karachi

2. Additional Secretary, 5. Chairman, APTMA,

Ministry of Commerce, Karachi
Islamabad.

3. All Collectors of Customs, 6. Chairman,

Central Excise and Sales Tax. Pakistan Hosiery Manufacturers
Association, Lahore

SUBJECT: CLARIFICATION REGARDING DUTY AND TAX REMISSION FOR EXPORT RULES
(DTRE), 2001.

I am directed to refer to the subject cited above and to issue following clarifications in
respect of the No Duty Draw Back Scheme as contained in the Duty and Tax Remission for Exports
(DTRE) Rules, 2001.

ISSUES
1. Can a DTRE manufacturer/exporter
declare “approximate” description, quantities and
values of input goods (to be imported or purchased
locally) under Rule 297 (1)(i) of DTRE Rules, 2001
2. Can a DTRE manufacturer/exporter
declare “approximate” input/output ratios and
anticipated wastages under Rule 297(1)(ii) of
DTRE Rules, 2001.
3. At times, the export order from a buyer is
cancelled but an order from other buyer is
available. Substitution of export contracts may be
allowed.
4. DTRE approval for imports and local
procurement should be made available to indirect
exporters as well.
5. Are “Trims” and “Accessories” allowed to
be imported under DTRE.
6. It is not clear whether purchase of input
goods from domestic supplies by an exporter,
being zero-rated, shall be free of sales ax and
entitled to input tax credit/refund of input tax paid
by him.
7. Can a unit operate part of its capacity/
production under DTRE scheme while
simultaneously operating the balance capacity/
production under the normal regime.
CLARIFICATIONS
Yes. The DTRE manufacturer/exporter can give
“approximate” description, quantities and values of
input goods. A variation upto 10% is acceptable as
normal.
Yes. The DTRE manufacturers/exporters are
allowed to give approximate input/output ratios and
anticipated wastages. The same is, however,
accountable in the reconciliation statement (to be
submitted under rule 304).
The existing Rules allow substitution of export
contracts under intimation to the Collector of
Customs.
It is already available under the DTRE Rules, 2001.
The definition of “exporter” covers “indirect
exporters” as well.
Yes. “Trims” and “Accessories” are covered in the
term “Input Goods” (Rule 296 (1) (f))
It is clarified that under Rule 297(8), purchases of
input goods from domestic supplier by an exporter,
being zero-rated, shall be free of sales tax. Being
zero-rated, input tax credits/refunds are also
available.
Yes. There is no restriction under DTRE Rules,
2001 on availing two or more schemes. An exporter
can avail other schemes besides DTRE regime
simultaneously, provided separate
records/accounts are maintained for each scheme.
8. In case of two approvals can the exporters
use items of both approvals to make exportable
goods under any one of the two or for the third
approval.
9. Collectorates do not accept export order or
contract and resort to verification of those
contracts/orders, which make the process very
cumbersome and time consuming.
10. For the manufacturers of identical goods,
inputs goods imported under one DTRE approval
may be allowed to be used for another DTRE
approval/export order.
11. Can the DTRE manufacturer obtain duty &
tax free goods from private bonded warehouse.
Yes. Such an arrangement is admissible under
DTRE Rules.
Under DTRE Rules, 2001, there is no condition of
any kind of verification of export contract/order from
abroad.
Moreover, under the provisions of sub-rule
(4) of Rule 297, a direct exporter can get DTRE
approvals on the basis of past export performance
without furnishing an export contract/order.
Under the provision of sub-rule (2) of Rule
300 of DTRE Rules, 2001, an exporter may transfer
his duty & tax free input goods to another DTRE
approved exporter of the same goods. The input
goods so obtained shall be utilized as per Rule 298.
Yes. There is no bar on procurement of approved
input goods from Bonded Warehouse under DTRE
Rules, 2001.
(Nadir Khan Hoti)
Chief (TEPI)