Customs to question BOI concessions on handset imports

The Customs Department is examining Board of Investment (BOI) concessions to telecom companies, saying there is an inconsistency in the regulation and wants a clarification from the Attorney General. “Lanka Bell and Suntel import handsets under duty concessions but they clearly factor the prices of the handsets into the selling price,” a Customs official told The Sunday Times, saying it plans to seek the AG’s advice in two weeks.

Customs are separately conducting a probe on Lanka Bell – on importation of equipment -- which included a brief raid on its premises on Tuesday, at the same time when Stassens was raided. Both companies are controlled by Harry Jayawardene. There are two types of BOI approvals granted to companies and these are classified under Section 16 and Section 17.

BOI officials said approvals under Section 16 are where the BOI grants permission to carry out an investment in the country. The investor must bring in US$ 250,000 through a Share Investment External Rupee Account (SIERA) where the BOI will give a recommendation for a visa to the investor.

Section 17 approval permits the company to import and purchase (locally) project related items including capital goods, free of Customs duty. With the Section 17 approval, a telecom company can forgo the import duty on CDMA telephone handsets, but the Customs say that this is misinterpreting the regulation.

“The handsets are normal equipment, they are not capital item nor project related items. The capital goods have to always be on company assets and we feel the telcos are using the Section 17 to bypass paying duty to handsets,” the Customs official said. He said that a connection cannot be granted without a handset.