Federal Government is pleased to direct that the import and supply of goods , mentioned in the column 2 of the table below and the raw materials, packing materials, sub-components, components, sub-assemblies and assemblies imported are purchased locally for the manufacture of the said goods shall be charged to Sales Tax @ 0 %, subject to the conditions specified.

GOVERNMENT OF PAKISTAN MINISTRY OF FINANCE, ECONOMIC AFFAIRS STATISTICS AND REVENUE (REVENUE DIVISION) *** Islamabad, the 18th July, 2013. NOTIFICATION (SALES TAX) S.R.O. 670(I)/2013.-- In exercise of powers conferred by clause (c) of section 4 of the Sales Tax Act, 1990, the Federal Government is pleased to direct that the import and supply of goods mentioned in column (2) of the Table below and the raw materials, packing materials, sub-components, components, sub-assemblies and assemblies imported or purchased locally for the manufacture of the said goods shall be charged to sales tax at the rate of zero percent subject to the conditions specified below the Table, namely:- TABLE S. Description of goods PCT Heading No. (1) (2) (3) 1. Colors in sets 3213.1000 2. Writing, drawing and marking inks 3215.9010 and 3215.9090 3. Erasers 4016.9210 and 4016.9290 4. Exercise books 4820.2000 5. Pencils sharpener 8214.1000 6. Geometry boxes 9017.2000 7. Pens, ball pens, markers and porous tipped pens 96.08 8. Pencils including color pencils 96.09 9. Milk including flavored milk 04.01 and 0402.9900 10. Yogurt 0403.1000 11. Cheese 0406.1010 12. Butter 0405.1000 13. Cream 04.01 and 04.02 14. Desi ghee 0405.9000 15. Whey 04.04 16. Milk and cream, concentrated and added sugar or 0402.1000 other sweetening matter 17. Preparations for infant use put up for retail sale 1901.1000 18. Fat filled milk 1901.9090 19. Bicycles 87.12

CONDITIONS (i) The zero-rating under this notification shall be available subject to determination of input/output ratios by the Input-Output Co-efficient Organization (hereinafter referred to as “IOCO”), if not already determined under an earlier concessionary notification issued for such goods: Provided that this condition shall not be applicable in case of import of finished goods and their supply in same state; and (ii) For import and local procurement of raw materials, packing materials, subcomponents, components, sub-assemblies and assemblies for the manufacture of the goods specified in column (2) of the said Table, the following conditions and procedures shall be followed, namely:- (a) a sales tax registered manufacturer of the goods specified in the said Table having suitable in-house facilities shall submit, in the format prescribed in Annex-A to this notification, the complete list of his annual requirement of the inputs he intends to import or purchase locally for the manufacture of goods specified in column (2) of the said Table, to the Commissioner Inland Revenue having jurisdiction; (b) the Commissioner shall approve the declaration of input-output ratio of the manufacturer without physical verification in case the declared input-output ratio and input requirement is in accordance with the prevailing industry average or the inputs consumption pattern of the applicant manufacturer or as already determined by IOCO under an earlier notification issued for such goods, in the format of approval prescribed as Annex-B to this notification; (c) in case the Commissioner is not satisfied with the declared input-output ratios of the goods to be manufactured because of their being prima facie not in accordance with the prevalent average of the relevant industry or in case the input-output ratios are not already determined by IOCO, he may, after allowing a six months provisional quantity, make a reference to the IOCO for final determination thereof. On receipt of report from IOCO the Commissioner shall then determine the final annual quantitative entitlement of inputs and grant final approval for zero-rated purchases or imports. In case of non-receipt of report from IOCO within four months of the application made by the manufacturer, the Commissioner shall provisionally allow another six months quantity to the applicant manufacturer; (d) in case of goods to be imported by the registered manufacturer, the authorized officer of Inland Revenue shall furnish all relevant information online to Customs Computerized System as per Annex-C to this notification against a specific user ID and password obtained under section 155D of the Customs Act, 1969 (IV of 1969);

(e) where a registered person supplies goods to a registered manufacturer of goods specified in the said Table, he shall issue a zero-rated invoice under section 23 of the Sales Tax Act, 1990 mentioning the name, sales tax registration and approval number of the buyer; (f) the registered manufacturer of goods specified in the said Table will be entitled to claim refund of input tax paid on utilities and such inputs, which are purchased by him after payment of sales tax, in terms of section 10 of the Sales Tax Act, 1990 read with the relevant provision of the sales tax rules, 2006; (g) the registered manufacturer shall maintain complete records of the inputs imported or locally purchased and the goods manufactured therefrom; (h) the input goods allowed under clause (ii) shall be consumed within twelve months of purchase or import thereof, where the consumption period shall start from the date of purchase or import of input goods. However, the input goods shall be purchased or imported before the expiry date of the approval. (i) the manufacturer shall communicate to the concerned Commissioner of Inland Revenue in writing about the consumption of imported or locally procured inputs within ninety days of their consumption. The indemnity bond shall be released on receipt of written confirmation regarding consumption of goods by the manufacturer. (j) in case the input goods are not consumed within the period allowed in the approval, the manufacturer shall pay the amount of sales tax involved or obtain extension from the Commissioner of Inland Revenue under intimation to the Collector of Customs; (k) the concerned Commissioner Inland Revenue, whenever he deems necessary but not more than once in a calendar year, may get the records of the manufacturer audited. In case it is found that the inputs have not been properly accounted for or consumed in the manufacture and supply of goods as prescribed, the Commissioner may initiate proceedings for recovery of the sales tax involved on the unaccounted inputs besides penal action under the relevant provisions of the Sales Tax Act, 1990; and (l) under circumstances of exceptional nature and for reasons to be recorded in writing, the concerned Commissioner may relax any of the conditions, if he is satisfied that such condition is detrimental to the bona fide purposes of manufacturer’s business, subject to such surety or guarantee he may deem appropriate to secure the sales tax and to ensure proper accountal and utilization of the imported or locally procured goods.

Annex - A [See condition (i)] Name of the Manufacturer: ________________________ Sales Tax Registration No: ________________________ N.T.N. No: ____________________________________ Address: _____________________________________ Application date: ______________________________ S. Description of PCT Description of raw PCT Input- Quantity No. goods to be Heading materials, components, Heading output manufactured sub-components, ratio assemblies, sub- assemblies and packing materials (1) (2) (3) (4) (5) (6) (7) Authorized Signature: _________________ Annex-B [See condition (ii)] Approval No. ____________________________________ Name of the Manufacturer: ________________________ Sales Tax Registration No: ________________________ N.T.N. No: ____________________________________ Expiry date of approval: _________________________ S. Description of goods PCT Description of raw materials, PCT Quantity No. to be manufactured Heading components, sub- Heading allowed components, assemblies, sub-assemblies and packing materials (1) (2) (3) (4) (5) (6) Authorized Signature of Sales Tax Officer: _________________ Annex-C [See condition (iii)]

Name of the Manufacturer: ________________________ Sales Tax Registration No: ________________________ N.T.N. No: ____________________________________ Address: _____________________________________ S. No. Description of PCT Heading Quantity Value input goods to be imported (1) (2) (3) (4) (5) Authorized Signature: _________________ ___________________________________________________________________ [C. No. 1/56-STB/2013 (Pt)] (Shahid Hussain Asad) Additional Secretary