Understanding In-Bond GD and VAT Implications in Pakistan
In-Bond GD refers to the filing of a Goods Declaration (GD) under the “in-bond” regime, where imported goods are moved to a bonded warehouse without payment of import duties and taxes at the time of arrival. This is allowed under Section 98 of the Customs Act, 1969, and is typically used for deferred taxation and duty-free storage.
Understanding EX-Bond GD and VAT Implications
When goods are imported into Pakistan and stored in a bonded warehouse, they are not immediately subject to import duties and taxes. However, upon filing an EX-Bond GD to clear these goods for local consumption, all applicable duties and taxes, including Sales Tax, become payable.
The standard Sales Tax rate in Pakistan is 18% on goods, unless the goods are specifically exempt or subject to a reduced rate
VAT / Sales Tax Implications on In-Bond GD:
- No VAT (Sales Tax) is charged at the time of filing the In-Bond GD.
- VAT becomes payable only at the time of EX-Bonding, i.e., when the goods are cleared from the bonded warehouse for domestic use.
- Sales Tax is charged at the applicable rate (generally 18%) unless the goods are zero-rated or exempt under the Sales Tax Act, 1990.
- No input tax adjustment can be claimed at the In-Bond stage, as no tax has yet been paid.
Practical Example:
- Step 1 – In-Bond GD Filed:
Importer files an In-Bond GD and stores goods in a bonded warehouse → No VAT or duties paid.
Step 2 – EX-Bond GD Filed (Later):
When the importer decides to clear the goods for sale or use → VAT and all duties are charged at the prevailing rates.
