In a significant move to curb the misuse of the Export Finance Scheme (EFS), the Federal Board of Revenue (FBR) has introduced a series of major amendments aimed at tightening regulations and ensuring greater accountability. The revised changes, which came into effect following the issuance of SRO301(I)/2025 on Friday, target various aspects of the scheme, including eligibility, security requirements, and compliance procedures.
One of the most notable changes is the withdrawal of the Export Facilitation Scheme (EFS) 2021 from importers of iron and steel scrap. This shift addresses concerns over potential misuse by certain importers in these sectors. By excluding these importers from the EFS, the FBR aims to ensure that the facility remains focused on those who are genuinely engaged in export-related activities.
In addition to the withdrawal of EFS benefits for certain importers, the FBR has also modified the security requirements for those availing the scheme. For manufacturers-cum-exporters who have recorded a minimum export value of $20 million or more over the last two years, a more stringent security protocol will now apply. These exporters will be required to submit an indemnity bond and post-dated cheques (PDCs) as part of their application for the facility.
For manufacturers-cum-exporters with exports valued at less than $20 million, the security requirements have also been adjusted. These businesses will now need to provide an indemnity bond and PDCs equal to the average annual duty and taxes of input goods used in exports over the last two years. Additionally, a bank guarantee or revolving bank guarantee will be required to cover any excess duty and taxes that may be deferred or remitted under the scheme.
The FBR has also introduced stricter monitoring and enforcement mechanisms for exporters with poor compliance histories. Those who have pending recoveries, contraventions, or are facing criminal proceedings will have their authorizations suspended immediately until they can provide a satisfactory defense. Non-compliance with reconciliation statements or stock audits could also result in suspension from the scheme.
To further enhance accountability, the revised Export Finance Scheme includes several procedural changes designed to streamline operations and prevent fraud. For example, the input utilization period for goods acquired under the scheme will now be reduced to nine months. In exceptional cases, this period may be extended, but only with approval from a committee to be constituted by the FBR.
The revised procedure also includes a shift in input authorization, which will now be based on the production capacity and input-output ratio of exporters. This change aims to ensure that only legitimate export activities are supported by the scheme. Additionally, the FBR will replace insurance guarantees with bank guarantees to offer more robust financial security for the program.
To prevent misuse of the scheme, there will be more stringent controls on vendor facilitation and the withdrawal of samples to ensure that imported goods are being used in the production of exported items. The FBR has also specified that exporters involved in supplies against international tenders, or those supplying to exempt projects or sectors within Pakistan, must file a declaration through the WeBOC system.
With these changes, the FBR seeks to foster a more transparent and efficient Export Finance Scheme that supports genuine exporters while minimizing the risk of abuse. The authority’s ongoing efforts to refine the system are designed to ensure that the scheme benefits the economy and incentivizes export growth while maintaining the integrity of the tax system.
These reforms represent a proactive step towards better regulation of Pakistan’s export sector and emphasize the importance of maintaining a balance between facilitating trade and ensuring compliance with fiscal policies.