Withdrawal of zero-rating facility: separate ERS to ease textile sector woes: expert

The only way to remove apprehensions of textile industry on blockage of refunds is to set up a separate Expeditious Refund System (ERS) for the textile sector to exclusively deal with the sales tax refund claims after withdrawal of the zero-rating facility on the local supplies of five zero-rated sector.
Syed Muhammad Shabbar Zaidi, a leading Karachi-based chartered accountant told Business Recorder here on Thursday that the major complaint of the textile sector is none or delayed payment of refunds. The existing ERS should continue for speedy payments of refunds to the registered persons. Following withdrawal of zero-rating facility on the local supplies of five leading export sectors, a separate ERS should be established which should operate under the name of the ERS Management Company comprising both the members of the All Pakistan Textile Mills Association (Aptma) as well as FBR officials.
The textile exporters should be practically engaged in processing and sanctioning of the refund claims under the ERS. One of the options is to give the management control of the ERS to the Aptma for filing and processing of claims based on authentic sales tax invoices. The whole process could be monitored by the FBR officials, but the textile sector be involved in the working of the ERS to ensure payment of speedy claims. However, the Aptma should be involved in the control management of the ERS with the assistance of the FBR.
Shabbar Zaidi said that the ERS Management Company should be empowered to exclusively submit, process and issue sales tax claims filed by the textile sector. This ERS should have an entirely a separate setup for filing of claims of the zero-rated sector brought into the normal sales tax regime at the local supply stage.
Top sales tax expert added that the existing ERS system should not be mixed with the proposed ERS. When the textile units itself would be involved in the filing of claims using invoice data, there would be very less chance of any kind of manipulation in the system. The textile sector be involved in the whole processing of the ERS with the help of the FBR officials. This would not only reduce the repeated complaints of the private sector on refund blockage, but the textile sector itself would be responsible for accurate submission of data during processing of claims.
When contacted, a FBR official said that the Board has restricted the sales tax zero-rating facility of five export sectors including textile, leather, surgical, sports and carpets to only registered manufacturers-cum-exporters or exporters for export purpose. The domestic supplies of these five zero-rated sectors will now be liable to sales tax at the standard rate of 17 percent. In case of domestic supplies, there would be comparatively less accumulation of refunds due to input adjustment mechanism. Under the new arrangement, exports are still zero-rated, but only local supplies have become taxable.