Tractors export to Afghanistan

The Federal Board of Revenue (FBR) has received a query from Ministry of Commerce seeking legal viewpoint on the admissibility of sales tax zero-rating on the export of tractors to Afghanistan by a leading manufacturer. Sources told that the Ministry of Commerce has referred the case of the tractor manufacturer for zero-rating facility to the FBR for comments. Based on the legal opinion of the FBR, Commerce Ministry would finalise its viewpoint on the export of tractors to Afghanistan.


According to details, the company is the largest manufacturer of agricultural tractors in Pakistan. It intends to export tractors in foreign currency on Documents Accepted (DA) basis to Afghanistan. The arrangement is that an order has been placed by a Dubai-based company who has directed Pakistani manufacturer to export the goods to Afghanistan and deliver the same to a representative of the Dubai based company. The payment is to be remitted by Dubai based company after 45 days of the export on DA basis. The amount is to be received in foreign exchange.


In terms of Para 7(2) of the Export Policy Order, zero-rating is available on export of goods to Afghanistan in case the goods are exported in convertible foreign currency against irrevocable letter of credit, confirmed order on realisation of export proceeds through banking channel or advance payment. The company understand that export on DA basis is covered by "confirmed order on realisation of export proceeds through banking channel" as export is being made through confirmed order and export proceeds will also be realised through banking channel within a period of 45 days. The company understands that the condition of paragraph 7(2) of the Export Policy Order will be fairly met and zero-rating of sales tax will be available to the company. 


However, before exports are made, a confirmation from Ministry of Commerce is required so that there is no interpretation dispute after the goods have been exported. For this purpose, the FBR has received a query from the Commerce Ministry on sales tax zero-rating facility, sources added.


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