- 20 Marks
Question
a) In recent times the export business community has increasingly expressed concern about the issue of duty drawback management by the Ghana Revenue Authority (GRA), particularly undue delays and non-payment of duty drawback claims as accrued over the years.
As an expert tax consultant, you have been invited by the Ghana National Chamber of Commerce for a technical meeting with representatives of the business community on the duty drawback regime.
You are required to prepare a brief paper for discussion at the meeting covering the following areas:
i) An explanation of the term “drawback” as prescribed under the provisions of the Customs Act, 2015 (Act 891), including the two different categories of duty drawback that may be paid by the Commissioner-General.
ii. Under what circumstances will goods be deemed to have been exported for drawback purposes as prescribed under Act 891?
b) Corncob Industries Ltd. a company based in the Central Region of Ghana which processes agricultural products is contemplating diversifying its product lines to take advantage of an identified market potential for a particular maize-based cereal. This will require:
- Retrofitting one of their production machines which will enhance its value and performance by about 75%.
- Repairs to the equipment used for packaging the products. This will enhance its value by approximately 10%.
- Servicing of a component of the sterilization unit which is still under the manufacturer’s warranty.
Management of the company has concluded discussions with the manufacturer of the machinery, equipment and sterilization unit based in France to undertake the retrofitting, repairs and servicing, if Corncob Industries Ltd. can have the items shipped to their factory in Milan, Italy for the purpose.
Alternatively, the manufacturer’s technicians may be brought over to Ghana with the necessary materials to undertake the retrofitting and repairs at the factory premises of Corncob Industries Ltd. Management of Corncob Ind. Ltd. is not certain of the Customs implications of shipping the items out to Italy for the works, which will take four weeks and subsequently re-importing the processed items into the country.
Required:
With reference to the Customs Act, 2015 (Act 891), explain to Management of Corncob Industries Ltd. details of the customs procedure for re-importation of goods after outward processing and the related liability to customs duty, with respect to the following issues:
i. condition under which the outward processing procedure may be used.
ii. period for discharge of the outward processing procedure.
iii. import duty liability on the goods when re-imported into Ghana after processing abroad.
Answer
Ai. “Drawback” refers to a refund of all or part of duties in relation to goods that are exported or used in a manner or for a prescribed purpose.
The Commissioner-General (CG) may pay a drawback of duty with respect to:
- Goods that are imported and subsequently exported in the same condition as when the goods were imported; or
- Imported goods that are used for the manufacture of goods in the country which are subsequently exported.
ii. Goods are deemed to be exported for drawback purposes where the goods are:
- Placed in an area that is a free zone or a duty-free shop.
- Exported.
- Designated as stores in accordance with the provisions of Act 891 and supplied for use on board a ship or aircraft outside the customs territory.
- Used for equipment, repair or construction of a ship or an aircraft as prescribed by Regulations.
- Used, or designated for use in any other manner that the CG may determine.
b) The Chief Executive Officer,
Corncob Industries Ltd,
Accra,
6 February 2018
Dear Sir,
RE-IMPORTATION OF GOODS INTO GHANA AFTER PROCESSING ABROAD
We refer to your letter seeking advice on the details of re-importation of goods into the country after such goods have been sent overseas for processing and present our views on the issue as follows, addressing the areas of concern specified in your letter:
i. The outward processing procedure may be used only where the goods exported under the procedure can be identified in the re-imported goods.
ii. The period within which the outward processing procedure is to be discharged is twelve months and may be extended by request of the holder of the authorization for a period of not more than twelve months.iii. Production machine:
Under the outward processing procedure, duty is chargeable on the full value of goods at re-importation where in the opinion of the CG, the form or character of the goods has been substantially changed by the processing. The production machine will therefore attract import duty on the full value since its value and performance will be significantly enhanced (by 75%) as a result of the retrofitting abroad.Packaging equipment:
Where in the opinion of the CG the form or character of the goods has not been substantially changed by the processing, duty will be chargeable only on the amount by which the value of the goods was increased by the processing. The equipment for packaging on re-importation will therefore attract duty on the value by which the processing enhances its form or character.Sterilization Unit component:
Where goods placed under the outward processing procedure are repaired abroad free of charge under warranty, no duty is charged on re-importation. The component of the sterilization unit will therefore not attract any duty on reimportation when processed abroad due to its current warranty.Yours faithfully,
Tax Consultant
- Tags: Customs Act, Duty Drawback, Export Procedures, Ghana Revenue Authority, Indirect Taxes
- Level: Level 2
- Topic: Strategic Indirect Tax Management
- Series: FEBRUARY 2018
- Uploader: Salamat Hamid
