KARACHI: Pakistan Yarn Merchants Association (PYMA) has urged the Federal Minister for Finance and Revenue Shaukat Tarin to eliminate the discrimination between industrial and commercial importers and provide equal opportunities for businesses.
It also requested him to impose same taxes on both so that business activities could be restored.
Hanif Lakhany, senior vice chairman of the Pakistan Yarn Merchants Association (PYMA), and Farhan Ashrafi, vice chairman, in an appeal to the minister said that commercial importers of synthetic yarns essentially cater to the needs of the SME sector.
The knitters and weavers in the SME sector don’t have access to bank credits and exclusively rely on commercial importers to meet their needs of raw materials.
The PYMA said, “Commercial importers also facilitate the SME sector by providing credit. Unfortunately, our current taxation policy penalizes the commercial importers of raw materials, which results in higher costs and subsequently the SME sector has to bear the additional cost on account of a discriminatory tax regime.”
The PYMA pointed out that the industrial importers of synthetic yarn are subjected to withholding tax at import stage at 1 percent versus 2 percent for commercial importers.
Furthermore, Industrial importers pay no value addition sales tax at import stage whereas commercial importers are subjected to a 3 percent value addition sales tax.
The extra cost incurred by the commercial importers is passed on to the SMEs rendering them uncompetitive.
They further said that the SME sector due to its very nature suffers from many disadvantages because of their small size and lack of access to formal credit. The government must ensure that they get their raw materials at competitive prices.
“Another contentious issue is the further tax in case of sales to unregistered buyer. The conventional wisdom would have us believe that more unregistered buyers will register to avoid paying further tax at 3 percent, and that the tax base will be expanded. The ground realities are very different, and this policy is incentivizing fake invoices causing revenue leakages,” it said.
Copyright Business Recorder, 2021