The Pakistan Hosiery Manufacturers Association (PHMA) has urged the government to continue the sales tax zero-rating facility to five export-oriented sectors in the upcoming federal budget 2017-18, besides speeding up the disbursement of drawbacks under Prime Minister Rs.180 billion export package.
PHMA chairman Adil Butt criticized the Federal Board of Revenue’s proposal to withdraw zero rated tax regime granted last year after a long debate and hectic efforts of the exporting industry. “FBR wants to end the facility just to make its balance sheet correct. The balance sheet might show enhanced revenue collection but the industry would be collapsed if the ‘no tax no refund’ system is withdrawn, which is already not being implemented properly,” he lamented.
He said the government had issued revised sales tax zero-rating regime for five export oriented sectors, i.e. textile, leather, carpets, surgical and sports goods from July 1, 2016. The National Assembly Standing Committee on Textile Industry had also supported the value-added textile sector’s demand for declaring all five export-oriented sectors as zero rated. He observed that zero rating of tax had reduced the work load of the Federal Board of Revenue, sparing the export sector from wasting time in getting refunds. This regime was allowed after proper diligence and comprehensive research.
Adil Butt urged the government that instead of ending zero rated regime it should implement this system in true spirit in budget 2017-18 as billions of rupees of exporters are still stuck up in refund regime. He said that zero rating facility was reinstated in order to save the exporters from liquidity crunch; however the FBR wanted to sabotage the government’s efforts of enhancing export. It has rolled back all sales tax refund payment orders (RPO) considering unnecessary objections, adding the miseries of exporters.
The government would have to immediately release refund payments against Sales Tax, duty drawback and drawback on local taxes and levies, besides bringing down energy tariff as per competitor countries amidst consistency in government policies. He said that inconsistency in government policies does not allow the exporters to plan even for a short-term period.
He said that under the Rs.180 billion package, the government has released just Rs. 1 billion which is not in proportionate with the export volume. The government must have been released at least Rs.8 billion, as four months have passed since the announcement of package in Jan 2017.
He warned the government that vital exports will plunge further if zero rated tax regime is withdrawn and cost of doing business is not brought at par with regional competitors.
PHMA chairman urged the PM and finance minister to pass directives to FBR to ensure immediate payment towards outstanding claims of sales tax, drawback and local taxes of the export sector. How will anyone make new investment when their existing investments are in jeopardy? he questioned.