Refund of sales tax of finished leather; PTA urges FBR to fix 'realistic' benchmark

Chairman Pakistan Tanners Association (PTA), Sheikh Afzal Hussain has urged Federal Board of Revenue (FBR) for early fixing benchmark realistically in order that exports can continue normally.

He highlighted the core issue that the FBR has fixed/determined "Unrealistic Benchmark" for the refund of sales tax of finished leather particularly cow & buffalo finished leather without consulting the industry due to which huge sales tax refund claim are being rejected of major /large exporters which has caused severe liquidity crunch and they are unable to procure raw material /chemicals for execution of export orders on time resulting cancellation of export orders as international market is very fragile for finished leather sector.

The finished leather is produced in cow/buffalo/ goat/ sheep skins which have thickness varying from 0.8 mm/1.0 mm (for Goat/sheep) and 1.0mm /2.5mm (for cow /buffalo according to end usage of articles) which is used in production of ladies/men shoes/belts/upholstery/Leather goods/Leather bags in variety of thicknesses.

All chemicals consumption are done according to thickness of leather and the finishing process which consumes chemicals according to the customer's requirement of end product which varies from 0.8mm to 2.5mm.

Therefore, the FBR has to consider the complexity of finished leather export business and should consider above mentioned variations. If benchmarking is fixed on business of lower thickness (like 0.8mm/1.0mm) then all the major exporters making finished leather for export in high thickness from 1.0mm to 2.5 mm and sometimes even more which consumes higher chemical percentage will suffer as claims are being rejected under FASTER since July and huge refunds are blocked of major exporters which were promised to be settled in 72 hours.

The PTA has already submitted a detailed working on benchmarking for finished leather to FBR based on the average thickness for fixing of realistic benchmarking so that large segment of finished leather industry exports can continue their exports without hurdle of benchmarking restrictions on sale tax claims.