The Federal Board of Revenue (FBR) has conveyed to the Ministry of Water and Power that the tax authorities cannot favour any new exemption of customs duty to the independent power produces (IPPs), as the concessionary rate of 5 percent customs duty is applicable on import of machinery/equipment and spare parts for balancing, modernisation and replacement by the IPPs.

An FBR official told Business Recorder here on Friday that the Ministry of Water and Power had moved a summary to the Economic Coordination Committee of the Cabinet to propose concessionary rate of customs duty on the import of machinery and equipment by the IPPs.

The Ministry had proposed the customs duty at the rate of 5 percent on import of equipment, machinery and spares for carrying out balancing, modernisation and replacement (BMR). In an effort to encourage more IPPs to take up the offer, the ministry also proposed that it will reduce the customs duty on the equipment and spare parts needed for the transition down to just 5 percent.

The FBR has informed the Ministry of Water and Power that at present, under serial number 11 of SRO.575 (I)/2006 dated June 5, 2006, there is already a concessionary rate of 5 percent customs duty on import of machinery, equipment and spares available to the IPPs.

Under the SRO.575(I)/2006, concessionary rate of customs duty is available on import of machinery, equipment and spares meant for initial installation, balancing, modernisation, replacement or expansion of projects for power generation through oil, gas, coal, wind and wave energy including under-construction projects, which entered into implementation agreement with the government. The concessionary rate of duty is also available on import of construction machinery, equipment and specialised vehicles, excluding passenger vehicles, imported on temporary basis as required for the construction of project.

This concession shall also be available to primary contractors of the project upon fulfillment of the following conditions: First, the contractor shall submit a copy of the contract or agreement under which he intends to import the goods for the project.

Secondly, the chief executive or head of the contracting company shall certify in the prescribed manner and format that the imported goods are the projects bona fide requirement and the goods shall not be sold or otherwise disposed of without prior approval of the FBR on payment of customs duty and taxes leviable at the time of import.

The temporarily imported goods shall be cleared against a security in the form of a post-dated cheque for the differential amount between the statutory rate of customs-duty and sales tax and the amount payable under the notification, along with an undertaking to pay the customs-duty and sales tax at the statutory rates in case such goods are not re-exported on conclusion of the project, te notification added.

SOURCE: BUSINESS RECORDER