ISLAMABAD: The Federal Board of Revenue (FBR) has recommended substantial changes to the Export Finance Scheme (EFS) to curb abuse and strengthen tax enforcement.
The FBR has recommended ending the service for companies that import iron and steel scrap as part of the modifications proposed by SRO204 of 2025 to the Customs Rules 2001. We will finalize these changes within the next week after receiving feedback from the appropriate parties on the draft. Proposed changes will be implemented in six months, including eliminating the Engineering Development Board (EDB) clearance process for engineering items and input-output ratios. The updated security protocols for entering the building have also been detailed.
Companies that have exported at least $20 million in the past two years must provide an indemnity bond with post-dated checks (PDC). Indemnity bonds and PDCs equal to the average yearly duty and taxes on input products used in exports over the previous two years, combined with a bank guarantee for any deferred or remitted charges, are required of those with export values below $20 million. Until a defense is presented, users having a history of poor compliance (such as outstanding recoveries, violations, or criminal proceedings) will have their authorization suspended immediately. Suspension can also occur if reconciliation statements or stock audits are not compliant.
The FBR intends to fortify monitoring through improved regulatory collection in stock audits, utilization tracking, and vendor verification. We will also update the WeBOC and PSW systems so that we can monitor imports and exports in real-time and introduce quality control sampling at the import/export stages. The input utilization term is nine months and can only be extended in extraordinary circumstances. All suppliers must be pre-declared and geo-tagged in the WeBOC system, and their processing times will be limited to 60 days. New vendors must obtain approval from the regulatory collector. Domestic sales will be limited, with a maximum of 5% of total output allowed for factory rejects or B-grade goods. Beyond this point, sales will be subject to import taxes. Claims for wastage exceeding the specified limitations will also be scrutinized more.
One of the financial penalties proposed by the FBR for misuse of the EFS is the instant encashment of bank guarantees or PDCs for unauthorized removals or exceeding use periods. The system will also impose restrictions on additional acquisitions in the event of late reconciliation statements. Within sixty days, the Chief Collector (Exports and IOCO) shall guarantee that all cases will be processed promptly to enhance operational efficiency. New participants must submit quarterly reconciliation statements to the EFS for the first three years. The notice also details how regulatory collectors will increase the frequency with which they check usage and stock-taking records.