A new regime of sales tax is likely to be in place from 1st April 2011 and all credit goes to the young and dynamic Aptma leadership for leading the industry and steering the situation in the right direction with the help of Federal Board of Revenue (FBR).
According to FBR sources, the SRO is likely to be issued soon, which would levy six percent sales tax on supplies of yarn from registered to unregistered and four percent on processed fabric from registered to unregistered persons respectively. Further, there would be no sales tax on the ginned cotton and supply of PSF and other manmade fibres.
They added that tax collected against six percent on supplies will have to be deposited into treasury and there would be no adjustment available whatsoever. However, in case the registered person pays sales tax amount on capital goods, maintenance spare parts, packing materials etc the same would be refunded to them within a week time. It is also been learnt reliably that in order to boost the registration drive, persons registered from 1st April onwards would never be asked any question about the source of investment of their business.
It may be noted that the government tried its level best to impose Value-added Tax (VAT), followed by RGST and consequently withdrawal of zero rating facility on local supplies to five export orienting sectors through SRO509. However, all these efforts proved futile until Chairman Aptma, Gohar Ejaz entered the scene and suggested the government to come out of the refund system. He presented a facts and figures-based case to the Finance Committee of National Assembly on the premise that rupees 517 billion of textile industry would remain stuck up with the government, out of which Rs 138 billion would be refunded and Rs 382 billion would be adjusted on monthly basis throughout the year.
Interestingly, no other stakeholder including Federation, Chambers and other industry associations were prepared to suggest anything tangible to the government on the issue. The FBR accordingly engaged Aptma to devise a formula of zero rating to eliminate the hassle of deposit and subsequent refund of the sales tax from the textile value chain. It was followed by the untiring efforts of Chairman FBR, Salman Siddique, convincing all stakeholders very articulately to agree to Aptma proposal of letting the textile value chain operate in zero rating regime, provided that sales and purchases are made to the registered persons and not sold domestically for consumption.
He argued before the textile industry stakeholders that this scheme would not only eliminate accumulation of refunds but also likely to attract more persons to get registered with the sales tax department and generate revenue to the exchequer. Furthermore, it would generate funds from sales made to unregistered persons.
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