Used by foreign missions: No additional duties on resale of locally purchased vehicles: FTO
ISLAMABAD: The Federal Tax Ombudsman Secretariat (FTO) on Wednesday conveyed to embassies and foreign missions that vehicles purchased from the local market and subsequently used by Foreign Missions are not subject to further duties upon resale.
The Federal Tax Ombudsman Secretariat (FTO) held the second session of the Diplomatic Grievances Redressal Cell (DGRC) at FTO Head office. This session brought together representatives from the embassies of South Africa, Philippines, United States of America, Poland, Ireland, Denmark, Qatar, Romania, and Kuwait.
Representatives from the United Nations World Food Programme were also in attendance. This event was chaired by Federal Tax Ombudsman of Pakistan, Dr Asif Mahmood Jah and featured briefings by senior officials of FTO Secretariat including Almas Ali Jovindah (Head of DGRC), Dr Arslan Subuctageen (Advisor Customs), and Khalid Javaid (Registrar).
Addressing a query from the representative of US Embassy, Dr Arslan confirmed that vehicles purchased in the local market and used by Foreign Missions are not subject to further duties upon resale, as taxes are already paid at the point of sale. In response to concerns from the Jordanian Embassy about challenges faced by outgoing officers in selling their vehicles, he advised contacting the 'International Customs' section of FBR. If the matter remains unresolved, he assured, the DGRC would assist further.
Dr Asif Mahmood Jah placed emphasis on FTO's mandate to provide a cost-free and efficacious forum for addressing tax-related issues, particularly those affecting foreign missions. He remarked that the DGRC was created in response to repeated concerns from the diplomatic community, pertaining to procedural delays and bottlenecks faced with FBR and Customs Authorities. With a 30-day resolution target, DGRC is designed to streamline communication and promote institutional accountability.
During his presentation, Almas Jovindah stated that the DGRC was established to formalize a consistent and responsive interface between taxation authorities of Pakistan and the diplomatic corps. Its mandate goes beyond administrative support as it aims to function as a dedicated mechanism to ensure that grievances of the diplomats are addressed with transparency and urgency.
Jovindah also shed light on the recent accomplishments of DGRC in which complaints from the embassies of Poland, Kuwait, Türkiye, and Belgium were resolved on a priority basis by FTO after facing considerable inaction.
While presenting performance statistics of FTO, Jovindah reported that as of May 2025, the FTO had received over 15,000 complaints, with an average resolution time of 34 days and a 96% implementation rate. In 2024 alone, 13,500 cases were handled, including 1,700 through informal Alternative Dispute Resolution (ADR). He also remarked that FTO is an autonomous body and works as a watchdog of FBR who intervenes in case of overreach or inaction of their officers.
Advisor (Customs), Dr Arslan Subuctageen provided a detailed briefing on the legal framework governing customs privileges for diplomats. Referring to SRO 578(I)/2006 and its amendment S.R.O. 649(I)/2017, he explained the duty-free import of vehicles by diplomatic missions under reciprocity, and the graduated duties applicable upon resale based on the vehicle's age and category. He also clarified that diplomats may shop at the designated duty-free diplomatic warehouse in Islamabad.
Dr Subuctageen also elaborated the distinction between diplomatic bags and diplomatic cargo. While diplomatic bags which are certified by the Sending State are exempt from inspection, cargo exceeding 500 kg is subject to scanning and requires documentation from the Ministry of Foreign Affairs (MOFA). In exceptional cases involving credible risk, inspections may be conducted in the presence of the mission and MOFA representatives.
FTO Secretariat's Registrar Khalid Javaid briefed participants on the legal framework governing zero-rated supplies and tax refunds for diplomats under Rules 51, 52, and 52A of the Sales Tax Rules, 2006 and S.R.O. 918(I)/2019. Javaid noted that exemption certificates from MOFA enable both pre-supply and post-supply zero-rating within a 180-day window. Refunds, processed manually via the STARR system under Section 66 of the Sales Tax Act, 1990 and Rule 38(5), are credited directly to mission accounts. He added that delays beyond one year can now be condoned up to three years per SRO 1444(I)/2024. On Petroleum Development Levy (PDL), refunds are granted under Rule 36 of the Federal Excise Rules, 2005, subject to MOFA certification and original receipts. He stressed the importance of proper documentation and clarified that while diplomats are exempt from certain taxes under Article 34 of the Diplomatic and Consular Privileges Act, 1972, Pakistan extends refunds as a reciprocal goodwill gesture, not as a blanket legal obligation.
Towards the end, an interactive Q&A session took place which provided an opportunity for diplomats to raise their concerns. A number of questions focused on procedural challenges, including confusion around the responsibility for verifying tax compliance when making purchases, especially from retailers who fail to deposit taxes with the national exchequer. In response, Khalid Javaid clarified that the obligation lies with the supplier, not the mission, and assured that diplomats retain the right to refunds even if the supplier is non-compliant. He added that FBR is empowered to take action against such retailers independently.
A participant from Embassy of Kuwait raised a query regarding delays in refund processing, particularly when documents are lost, rerouted, or caught between MOFA and FBR. Khalid Javaid acknowledged the bureaucratic gaps and clarified that once MOFA issues an exemption certificate, the responsibility to process the refund lies squarely with FBR. He encouraged missions to submit pending summaries directly to his office for coordinated follow-up and escalation.
Regarding older claims and refund eligibility, the participant from UN World Food Programme noted that UNWFP had accumulated unpaid refunds since 2016. Javaid explained that while there is a statutory one-year limit under Section 66 of the Sales Tax Act, condonation up to three years is now possible under SRO 1444(I)/2024. He invited missions to submit full case details to explore possible facilitation within legal bounds.
Diplomatic representatives expressed their appreciation to Federal Tax Ombudsman HE Dr Asif Mahmood Jah and his team for convening a solution-oriented seminar that directly addressed long-standing operational challenges. They acknowledged the objective of DGRC in providing sustained institutional support to the foreign missions in Pakistan. As a gesture of acknowledgment, certificates of participation were distributed by the Honorable FTO, Dr Asif Mahmood Jah at the end of the seminar.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
7 hours ago
- Business Recorder
WHT regime: Finance Bill will introduce major changes
ISLAMABAD: Finance Bill (2025-26) will introduce major changes in withholding tax regime in budget (2025-26) to generate additional revenue. According to sources, the difference of withholding taxes between filers and non-filers would be further widened from next fiscal year. The heavy reliance on withholding taxes would continue in the next fiscal year. The withholding taxes (collected in sales tax mode) constitute over 70 percent of the direct taxes collection. One of the proposals under consideration is to raise tax rate on interest income. Cash withdrawals from banks: FBR proposes raise in WHT for non-filers The Federal Board of Revenue (FBR) has proposed to raise withholding tax on cash withdrawal from the banks by non-filers from 0.6 percent to 1 to 1.2 percent. Another proposal is to impose 1.5 percent withholding tax on the value of imports. The rates of Withholding Tax on immovable properties are expected to be rationalized in the upcoming budget (2025-26) to facilitate buyers and sellers of real estate sector from July 1 2025. Other proposals under consideration included raise in withholding tax on supplies, services and contracts. Copyright Business Recorder, 2025
Business Recorder
7 hours ago
- Business Recorder
Expiry of statutory time limits: ST Department criticised for passing orders
LAHORE: Tax experts have objected to the sales tax department for passing orders after expiry of statutory time limits while treating the tax cases. They are of the view that the departmental proceedings after the expiry become invalid because these time limits are mandatory. They asserted that the specific insertion of time periods through statutory amendments showed a clear legislative intent to make these timelines mandatory. The use of 'shall,' they argued, indicated a mandatory requirement, particularly since no such time limit existed prior to 2000, and its later inclusion was deliberate. The department, on the other hand, believes that the time limits are meant only to ensure speedy proceedings and should not invalidate lawful tax liabilities. Ironically, the department deals with all such time limits as directory, saying that in fiscal laws, especially, such time limits are aimed at efficient and timely tax collection. They contended that the time limits are intended to enforce administrative discipline, not to cancel tax liabilities entirely. According to the departmental sources, the absence of any explicit penalty for missing these deadlines supports their view that the time limits are not mandatory, rather than mandatory. According to the department, the time limits prescribed for passing orders under sections 11(5), 11G, and the former section 36 of the Sales Tax Act are mandatory or merely directory and the use of the term 'shall' in these provisions does not impose a strict legal obligation to adhere to the specified timelines. However, the tax circles are of the considered view that the language of sections 11(5), 11G(2), and section 74 suggests that both uses of 'shall' in the provisions are mandatory, especially when combined with the words 'in no case.' They said that reading the timelines as directory would render critical parts of the statute meaningless. Section 74 does not give FBR unlimited power to extend time. Any extension must be based on objective and reasonable grounds to strike a fair balance between administrative discretion and legal certainty, helping prevent delays, abuse of power, and uncertainty in tax matters. Furthermore, they added that the 2024 amendments retaining the same time structure strongly confirmed Super Asia's interpretation. Copyright Business Recorder, 2025
Business Recorder
a day ago
- Business Recorder
ST returns filing: PCDMA concerned at FBR's new requirement
KARACHI: The Pakistan Chemical & Dyes Merchants Association (PCDMA) has raised serious concerns about difficulties faced by traders in filing their sales tax returns, following a new requirement introduced by the Federal Board of Revenue (FBR). Through SRO 55(I)/2025, the FBR has made it mandatory for all registered commercial importers, distributors, and wholesalers to declare their stock position in Annexure H1 with every monthly sales tax return. However, PCDMA Chairman Salim Valimuhammad said the lack of clear instructions from the FBR has created unnecessary confusion and hardship. He explained that many traders submitted their March 2025 returns without Annex H1 simply because they didn't understand the process. As a result, they're now unable to declare their opening stock for April, and the delay continues even in June. 'PCDMA has received many complaints from members who are still unable to file their April 2025 returns due to this confusion,' Valimuhammad stated. He added that many traders were forced to go back and forth with the FBR for clarification. Eventually, the FBR allowed revised returns without needing to change Annex A or C or seek commissioner approval—but by then, it was too late for many. To address the issue, PCDMA is urging the FBR to grant traders a 60- to 90-day grace period to submit Annexure H1 after filing their returns. This would be similar to the 120-day window already available to manufacturer-exporters. 'PCDMA believes that such decisions should be made after proper consultation with trade bodies,' Valimuhammad said. He emphasized that timely and clear communication is crucial to ensure compliance and avoid similar problems in the future. PCDMA continues to push for reforms that protect traders' interests and promote smoother tax procedures. The association urges urgent action before more disruptions affect business operations, confidence, and overall revenue collection in the coming months. Copyright Business Recorder, 2025
