The Central Board of Revenue (CBR) has hinted at reducing the withholding tax on polyester yarn from six percent to two percent to provide relief to the polyester industry against high import duties.
This was stated by CBR Chairman Abdullah Yousuf, while speaking at the 43rd annual dinner of Pakistan Yarn Merchants Association (PYMA) on Tuesday.
He said that the CBR was bound to maintain high rates of duty on polyester raw material PTA, Meg, polyester yarn and fabrics under a Federal government commitment with a multi-national until June 2008.
The commitment whether right or wrong would definitely affect the polyester industry at a time when the world trade was opening under the World Trade Organisation (WTO), Abdullah said, adding that if the PYMA submits its proposal of reducing the wealth tax on polyester yarn import, the CBR would positively respond.
Responding to a question by Muhammad Iqbal Mangrani, a former PYMA Chairman, Abdullah agreed that the sales tax refund had been a major problem confronting the exporters by blocking their huge capital round-the-clock at a substantial cost.
He said the government had removed sales tax from ginned cotton in the new budget.
"The CBR is looking the possibility of making other areas zero rated or to evolve a system by which the quantum of refund can be reduced considerably from the present level of Rs 52 billion paid last year," he said. He stressed the need for improving the refund processing system through an automated system, which could quickly verify invoices submitted for refund.
Abdullah said that the CBR would consider exempting commercial importers from submitting monthly returns after the payment of sales tax had been made mandatory at the import stage.
He made it clear that the CBR decision to allow exemption to cases selected for audit provided the current tax was enhanced by 20 percent. He said that there was no need for an offer from the department for revising the return and the choice was voluntary.
Abdullah pointed out that the CBR was fully committed to the principal of rationalising the tariff structure by reducing duty on raw material to five percent and 25 percent on finished products. "It has rationalised duty on 500 items in the new budget, but still the principal has not been fully implemented because of snags like commitment with the ICI," he said.
The government was trying its best to improve the business environment and reduce the cost of business, which would not only increase production, but would also generate revenue, he said, adding the CBR had started a process of reform to make things transparent, efficient and competitive through simple procedures to achieve its objectives.
"You would find a real difference in future," he added.
He agreed to the suggestion made by Maqsood Ismail, former Pyma Chairman, to give handsome salaries to the CBR staff to minimise chances of corruption, and said this was part of the reform process. "We want to run the CBR as an independent autonomous organisation free from the government restrictions."
The CBR chief was informed that the goods were being cleared at low valuation level at dry ports in the country as compared to the Karachi port.
He said that all ports were being linked with the computer and it would be ensured that goods were cleared everywhere on the basis of valuation made at Karachi.
A Pyma member informed the CBR chief that banks did not accept returns after 1.30 pm and also they did not easily accept the pay orders and call the taxpayers several time to confirm the veracity of the banking document.
He said the CBR had eliminated the condition of indemnity bond and installation certificates for machinery imports, yet the customs staff harasses the investors to fulfil conditions, although he had been paying sales tax for three years.
Abdullah said that the CBR was considering facilitating the taxpayers in filing tax returns. It had also been decided that in the old cases of machinery imports, the importers could release their indemnity bonds by paying five percent duty and also there would be no requirement of installation certificates.
Earlier, Pyma Chairman Khursheed Ahmed Sheikh said that presently the customs duties on import of polyester filament yarn were 20 percent and in some cases 25 percent. "These are very high as compared to the prices of raw material and infrastructure in China. Because of our non-competitive synthetic yarn prices, we are providing a massive opportunity to the Chinese fabrics imports through official as well as unofficial channels," he added
He said that the country had substantial growth potential in polyester sector like Korea and China because of availability of abundant cheap labour and surplus capacity of producing polyester fiber provided the customs duties on import of raw material and finished yarn were reduced.
The dinner was attended, among others, by Member, CBR Audit, Pervez Amjad, Collector of Appraisement Afzal Bhatti and Collector of Sales Tax (Enforcement) Khwaja Tanveer Ahmed.
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