A package to part with

The last few days of the PML-N government were a flurry of activity. This included the Economic Co-ordination Committee (ECC) approving extension of the Prime Ministers Export Package for the next three years. The package is now set to lapse on June 30, 2021.

Recall that the original PM Package worth Rs180 billion was an attempt by the PML-N government to plug the fall in exports; the dip was mainly on account of an overvalued rupee and a high cost of production as compared to regional peers.

Initially the package removed customs duty and sales tax on import of cotton while also abolishing the same on man-made fibres except polyester. The original duty drawback rates for textile garments and textile made-ups were 7 and 6 percent respectively while sports goods and leather were taxed at 7 percent.

Subsequently, the package was modified to allow 50 percent of the incentives to all eligible sectors and the remaining 50 per cent to those exporters who managed to increase their exports by at least 10 percent in FY18 as compared to the previous year.

Now in the second such alteration, the former government has included new sectors for duty drawback which include electric fans, transport equipment, auto parts and accessories, furniture, stationary, vegetables and meat. Packaging material has also been allowed for GST refunds and zero rating which was a budget demand of the All Pakistan Textiles Mill Association (APTMA).

The Commerce Ministry believes this relief will cost the exchequer Rs65 billion out which Rs41 billion will account for Drawback of Local Taxes and Levies (DLTL). Industry stakeholders deem the move positive but are quick to point out that the original package if implemented properly would have been sufficient.
Over the past years, textile associations in particular have been pleading for refunds worth more the Rs120 billion. These include both DLTL and outstanding sales tax refund claims, some going back years. The government on its last day did decide to pay Rs31.3 billion in sales tax refunds in which industry stakeholders and exports term a move to gain political capital.