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ISLAMABAD: The Federal Board of Revenue (FBR) has strongly opposed a proposal of the textile sector for the restoration of zero-rating regime or applicability of lower rate of sales tax on five export-oriented sectors.

Sources told Business Recorder here on Wednesday that exporters have approached the prime minister and different parliamentary committees with the proposal to restore the sales tax zero-rating regime in the budget (2020-21).

The alternate proposal of the industry is to reduce the sales tax rate from 17 percent to a lower percentage like five percent on the five export-oriented sectors.

However, the FBR has taken the principal stance for not withdrawing the sales tax regime from the export-oriented sectors.

According to the sources, the FBR can only propose to the policy makers and the final decision would be taken by the government.

The issue of zero-rating regime was discussed during the last meeting of businessmen and exporters from Sialkot with Hammad Azhar, Minister for Industries and Production, and the FBR officials at the Ministry of Industries and Production few weeks ago.

During this meeting, the senior officials of the Ministry of Industries and Production had informed the exporters that the government would consider possible restoration of the zero-rating regime during the budget preparation exercise for the next fiscal year.

The ministry has conveyed the concerns of the exporters to the Ministry of Finance as well as the FBR.

Private sector opined that the imposition of 17 percent sales tax had brought a disastrous impact on the textile industry and its exports as well as it caused liquidity crunch due to stuck refunds worth billions of rupees, and under the prevailing circumstances the government should review and restore zero-rated regime for the five major export sectors as a lifeline for the economy.

On January 6, 2021, the former FBR chairman had tweeted, "Zero Rating of Export Sector. I fought and won the war for abolition of zero rating for export sector. Reversing it will be regressive. If this is done then we should forget about any tax system in Pakistan. Improve refund system. In this age of technology this will be absurd."

Copyright Business Recorder, 2021