Doulot Akter Mala

Thousands of exporters who have enjoyed indemnity bond to import machinery duty free have been warned of "actions" if they failed to submit their export documents by the end of November.

The National Board of Revenue (NBR) said it was extending the deadline for the exporters to submit their bond utilisation documents for the sixth and "final" time after requests from top business chambers.

"The deadline has been extended for 45 days," a top NBR official told the FE Thursday.

"But this is the last extension. We told the exporters that we would take actions against the export-oriented firms which would fail to submit documents that they have indeed utilised the duty-free facility for mainly export purposes," he added.

The board took the hardened move following findings that many export-oriented firms, which used the indemnity bond to import machinery without paying taxes, have sold their goods to the local market, instead of exporting them.

The government offered the bond facility to 100 per cent export-oriented garment industry in the 1990s to boost the key lever of the economy.

The facility was given on condition that a manufacturer must export a minimum 80 per cent of the goods being produced by the machinery imported duty-free.

The authorities have scrapped the facility in the 2008-09 fiscal year and imposed a minimal 1.0 per cent duty on import of capital machinery in the wake of widespread misuse of the facility.

Studies done in 2007-8 fiscal year found that the board has lost Tk 3.50 billion in revenues due to the abuse of the facility by at least 9,000 indemnity bonds.

"Apart from duty evasion, bond misuse has also caused uneven competition for the commercial importers. The manufacturers who enjoyed bond facility undercut the commercial importers by using the duty-free sop," the NBR official said.

An exporter is required to sign a bond paper on condition that he would export bulk of his production, but a large number of exporters simply ignored government's order after availing the duty free import facility.

The NBR studies have also revealed that the indemnity bond has also been used for under-invoicing and money laundering, as importers in most cases did not declare price of the machinery imported under the facility.

Officials said they have extended the deadline again after pleas from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) and Bangladesh Corrugated Carton and Accessories Manufacturers and Exporters Association (BCCAMEA).

But they warned that the NBR would not extend the deadline further.

Under the customs laws, if any exporter fails to comply with the conditions of the bond facility he would have to pay import duties plus 10 per cent interest rate.

Exporters have said that many manufacturers don't want to submit bond papers due to the bureaucratic hassles and complex procedure.

"They have told us that the whole process eats up a lot of their time," said a NBR official.

"Besides, their chambers have said that it takes time to export products after the duty-free imported machinery is set up. Especially, big manufacturers set up machinery in phases, which is time consuming," he said.