REAP raises objections, terms Finance (Supplementary) Bill 2021 'devastating step'

LAHORE: Terming the Finance (Supplementary) Bill 2021 as a “devastating step” that envisages withdrawal of zero-rating status of various export-oriented sectors, the Rice Exporters Association of Pakistan (REAP) has sought immediate intervention of parliamentarians and finance ministry officials for bringing amendments to the bill before its passage from the National Assembly.

According to the letters written to the Senate, National Assembly Secretariat, Finance Minister Shaukat Tarin, Minister of Commerce, Federal Board of Revenue (FBR) chairman and Director General Agriculture Punjab, REAP Chairman Ali Hussam Asghar pointed out drawbacks of the bill and wondered that the proposal to omit Serial Number 9 of the Fifth Schedule of the Sales Tax Act, 1990, would have far reaching implications and that the government took the decision without their consent.

“The withdrawal will have a devastating impact on exported goods mentioned in Serial Number 9 of the Fifth Schedule of the Sales Tax Act, 1990,” said Ali Hussam Asghar in the letters which are available with Business Recorder.

According to the REAP chairman, the goods exempted under section 13, if exported by a manufacturer, would be considered as zero-rated. “By the virtue of this amendment, the legal proposition has now drastically been changed. The zero-rating to the exported goods of an exempted item would no more be available and therefore the input tax on the purchase of goods exported is also no more available in terms of already placed restriction under section 8(1) of the Sales Tax Act, 1990,” he added.

He said that rice is one of the sales tax exempted items having “star export performance”. During the last five years, he added, the export volume of this agro-based industry remained over $2 billion.

Export containers: Reap urges govt to devise strategy

“The withdrawal of sales tax input adjustment/refund may significantly increase the cost of doing business in this sector,” Ali Hussam said, adding that at the same time Pakistan has a cutthroat competition in this segment with regional countries, particularly India.

“From biryani to pulao, Pakistan and India’s shared culinary landscape is defined by basmati, distinctive long-grain rice, which now is at the centre of the latest tussle between the two bitter rivals. India has applied for an exclusive trademark of the basmati title in the European Union setting off a dispute that could lead to a major blow to Pakistan’s position in the export market,” he highlighted.

According to the United Nation’s statistics, the REAP chairman said India is the largest rice exporter in the world netting $6.8bn in annual earnings, with Pakistan in the fourth position at $2.2bn per annum.

He said it is quite clear that any change in the landscape of the country’s policy of “sensitive” export items may backfire and may cramp the country’s export which is already lagging far behind its potential.

The country is already facing a serious current account deficit and any threat to its exports may be fatal to the economy, he added.

Ali Hussam further said that before extending this proposed amendment, the FBR and other relevant authorities failed to comprehend the above-stated economic implications and challenges since they have not seen any revenue impact shared by the FBR on account of this proposed amendment.

“It is, therefore, earnestly requested to kindly revisit this proposed amendment to ensure export performance and growth of this segment in the larger interest of the country,” he added.

Copyright Business Recorder, 2022