SRO 2(I)/1996

GOVERNMENT OF PAKISTAN MINISTRY OF FINANCE AND ECONOMIC AFFAIRS NOTIFICATION Islamabad, the 1st January, 1996 CUSTOMS S.R.O. 2 (I)/96.- In exercise of the powers conferred by section 19 of the Customs Act, 1969 (IV of 1969), the Federal Government is pleased to direct that all computers and related hardware peripherals, including hardware and software, telematic infrastructure and soft ware development tools, as are not manufactured locally, and are to be used exclusively for software exports shall be exempt from so much of the customs duty as is in excess of 10% ad valorem leviable under the First Schedule to the Customs Act, 1969, if imported by any "Software House/Software Company" as defined in para 2.2 of Policy Framework and Incentive Package for Software Companies in Pakistan, issued by Private Software Export Board, Ministry of Communications, Government of Pakistan subject to the following conditions, namely:- (i) only such computers, equipment, peripherals, other hardware telematic infrastructure and software development tools shall be entitled to exemption under this notification as are used for development and export of software and are certified so by the Private Software Export Board (PSEB). The PSEB shall take such measures as it deems necessary to ensure that "Software House/Software Companies" entitled to avail exemption under this notification to import those computers, hardware, peripherals, telematic infrastructure and software tools as are exclusively used for development of software only, and certified so by the PSEB. (ii) under this notification the exemption of customs duty to the equipment detailed in the preamble above shall only be available to the "Software Houses/Software Companies" which are duly registered with PSEB under section 4 of Policy Framework and incentive package for software companies in Pakistan issued by Private Software Export Board, Ministry of Communication, Government of Pakistan, and the importers seeking exemption available under this notification furnish a certificate set in Annex-I to the Customs with indemnity bond in Annex-II. (iii) the "Software House/Software Companies" who avail exemption of customs duty under this notification shall maintain record of imported goods on the format set out in Annex-III and they will be under obligation to export the software annually equivalent to 1.25 times of CIF value of hardware and software imported under provisions of this notification. Further, the Software House/Software Companies will be under obligation to export software equivalent to 1.25 times their annual wage bill converted in US$. The obligation on the hardware part will be fulfilled over a period of three years. The annual export obligation of the Software Houses/Software Companies who avail exemption under this notification will be ascertained by PSEB which will issue certificate in the format set out in Annex-IV to the concerned Software Company/Software House regarding fulfillment of the obligation and a copy of such certificate will be endorsed to the Collector of Customs under whose jurisdiction the exemption of imports were effected or being effected by any Software Company/Software House (iv) If any "Software Company/Software House" fails to achieve its annual target of export in any one or more of first ten years of its operation, it will have to pay, in each year of default, 1/10th of customs duty statutorily chargeable thereon. Further if PSEB fails to certify the fulfillment of export obligations mentioned above of any Software Houses/Software Companies, the exempted duties on imports effected under this notification by that Software Company/Software House will become payable instantly with 15% penal surcharge on the CIF value of goods assessed at the time of their import. The recoveries of such payable customs duties and penal surcharge will be effected under the relevant provisons of the Customs Act, 1969 besides initiation of any legal/penal action which the concerned Collector of Customs deems fit to secure or recover the Government dues. (v) The goods imported under this notification will not be saleable or transferable for a period of three years from the date of import to any other person or company and in case of such sales or transfer the importer of goods under this notification will be liable to pay whole of the chargeable customs duties on the imports effected by that Software Company/Software House besides any penal surcharge which may accrue on it due to any default of fulfillment of export obligation of the importing Software House/Software Company. (vi) The importer shall, at the time of import, submit a detailed list of goods specified in the preamble of this notification and shall also make a written declaration on the bill of entry to the effect that the goods have been imported for the development of software (exports only). (vii) The importer shall furnish an indemnity bond in the form set out below to the extent of customs-duties exempted under this notification, the said bond shall not be discharged till the expiry of one year after the commissioning of the project approved by the Private Software Export Board after due verification by the Assistant Collector of Customs and Central Excise in whosejurisdiction the Software Company/Software House is located and such certificate of verification would clearly state that computer and equipment imported for the purposes specified in the bills of entry have been duly installed/used; and (viii) In the event of non-production of such certificate by the importer, the Collector of Customs shall enforce the indemnity bond and proceed to recover Government dues under section 202 of the Customs Act, 1969 (IV of 1969). Explanation:- For the purpose of this notification:- "Software House/Software Company" means a Private or Public Limited liability company or a Registered Partnership firm or a sole proprietorship engaged primarily in "Software and Related Services" business as described in Para (2) of Policy Framework and Incentive Package For Software Export Board, Ministry of Communication, Government of Pakistan. ANNEX - I Serial No._______________ Dated:_______________ CERTIFICATE ( of Registration with PSEB ) It is certified that M/s _________________________________________________________________________ _____________________________________________________________________________________________________ (Address) has applied for registration with Private Software Export Board (PSEB) dated ______________ and they have been granted membership No._____. Authorized Signatures The Registration Committee, Private Software Export Board, Ministry of Communication, Government of Pakistan. ANNEX - II INDEMNITY BOND WHEREAS, the Federal Government has, by its decision contained in Notification S.R.O._____(I)/95, dated the _____1995 and subject to the conditions specified in the said Notification been pleased to direct that the goods, as are not manufactured locally, if imported by Software Companies/Software House for the exclusive use in development and export of Software shall be exempt from the whole of customs-duties. AND WHEREAS M/s__________________having registered office at _______________have imported goods as are not manufactured (Name of Importer) locally, in accordance with the conditions specified in the aforesaid Notification for installation and use at _______________ (address of unit). NOW, THEREFORE, in consideration of the release of goods without recovery of the leviable customs duties the importers bind themselves to pay on demand to the Federal Government the sum of Rs.__________being the customs-duties leviable on the goods mentioned above if the importers fail to produce a certificate from the concerned Assistant Collector of Customs and Central Excise within one year from the date of filing of bill of entry for home consumption relating to the goods to the effect that the goods have been installed/used at the said unit. The importers further agree and bind themselves to furnish a certificate of their foreign exchange earnings from the Private Software Export Board within one year of import of goods under this notification to the effect that their annual export earnings as specified in the notification failing which they will be charged 1/10th of total chargeable customs duties for every year of default. The importers further agree and bind themselves that the amount of customs-duties covered by this Bond may be recovered as arrears of customs-duty under section 202 of the Customs Act, 1969 (IV of 1969). The Bond shall become void when the aforesaid certificate has been produced and the concerned Collector of Customs is satisfied that the importers have fulfilled all the conditions of this Bond and the aforesaid Notification. Signed by importers on this___________________ day of _____________________19 . _________________________________ Managing Director ( Name and Permanent Address ) Witness_______________________________________ (Signature, name, designation and full address) Witness________________________________________ (Signature, name, designation and full address) Note:- The bond shall be witnessed by a Government Servant in BPS-17 or above and authenticated by an Oath Commissioner, Notary Public or an officer of Scheduled Bank. ANNEX - III Register of sale of software produced from goods imported under Notification No. S.R.O.______________dated_______________. -------------------------------------------------------------------------------------------------------------------------------------------------------- Sr.No. Name & Address Date of Sale Goods Sold FOB Value Quantity Name & Date of the consumption certificate ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- (1) (2) (3) (4) (5) (6) (7) ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ANNEX - IV Serial No._______________ Date______________ CERTIFICATE OF FOREIGN EXCHANGE EARNINGS It is certified that M/s___________________________________________________ PSEB registration No._________ who imported the computers, equipment, software under Notification No. S.R.O.____(I)/95, dated_________for development of software of CIF value___________ vide the following Bills of Entry No. and date:- Bill of Entry No. & Date IGM Date (1) (2) (3) have fulfilled the required export obligation amounting to Rs._________for the year _________. Khalid Akbar Deputy Secretary C.No.6(33)/95-01/96 As amended S.R.O.524(I)/96, - dated 13.06.1996