Pakistan: Textile sector rejects new taxes on export

KARACHI: The value-added textile sector has vehemently rejected the withdrawal of zero-rating of export sector by the present government.

Chairman of Towel Manufacturers Association of Pakistan (TMA) South Zone, Syed Usman Ali said that the new measures taken by the government would open up a floodgate of corruption to the government officials and the trade. “The menace of flying invoices will flourish in the country once again and will open up various avenues to the non-genuine traders to claim fake refunds of GST while genuine exporters’ huge capital will remain tied up with the FBR,” Usman pointed out.

Usman said that though government did not impose GST on exports directly but as it brought ginners under GST regime besides unregistered suppliers and at import stage imposition of GST would massively affect exporters resulting in blocking of their capital. TMA chief said that under the Presidential Ordinance the upward revision of SFED (Special Federal Excise Duty), too has been increased to 2.5 percent from one percent which would massively increase overheads of exporters as SFED is imposed on all banking instruments.

TMA Chief also expressed worry over the one-time imposition of surcharge on income tax as it was not clearly defined in the SRO that how it would be imposed on exports.

He said that government is creating a sheer mess in the exports trade by trying to further blockage on the exporters’ hard-earned money in addition to the already tied up refund claims against duty drawbacks, GST, DLTL (Drawbacks on Local Taxes and Levies) to the tune of over Rs46 billion for the last three years. Usman demanded the government immediately withdraw SRO 231(I) 2011 and restore status quo of the original SRO 509(I) /2007 of June 9, 2007 allowing zero-rated status to five export oriented sectors.

“This amendment would create enormous problems in the entire supply chain and there are many questions arising such as sale of cotton by ginners to spinners which would attract sales tax as ginners are not required nor are the exporters-cum-manufacturers,” Usman said adding that these five zero-rated export sectors are facing hardships due to high prices of cotton and cotton yarn, frequent load shedding of gas and electricity, liquidity crunch and serious law and order situation, he added.

Moreover, there are chances of unscrupulous elements coming into the game like under-invoicing, misdeclaration and deliveries without invoicing. All these factors would strengthen the parallel regime and would weaken the government s goal of documenting the sector. He added that a large number of manufacturers would suffer more and many questions would be raised with regard to audit queries by auditors due to this cumbersome amendment, which might result in high number of litigation. staff report