Amin Hashwani, Chairman, the Karachi Cotton Association has expressed great concern over the intention of the government to impose sales tax on raw cotton in the federal budget 2015-16 in order to generate its revenue. The KCA has always strongly opposed the proposal to impose sales tax on raw cotton, as it discourages production and inhibits the smooth flow of exports and runs counter to the laid down government policy of encouraging cotton trade in the country.
It is worthwhile to mention here that no where in the world sales tax is imposed on raw cotton. Any hindrance in the smooth exports of cotton will prevent the growers from getting a fair price for their produce, which is a key objective of the government.
It may be realized by the government that nearly 80 percent-85 percent of the cotton crop is exported in the form of raw cotton, cotton yarn, cotton fabrics, garments and cotton made-ups and sales tax, if levied on Raw Cotton, would be refundable thereon at the export stage. Taking into consideration, substantial expenses involved in tax collection, administration and in the refund process, the balance available amount to the Government would be comparatively insignificant.
In addition, exporters of raw cotton usually operate on narrow margins hence, they cannot afford to keep substantial borrowed amounts struck-up by way of payment and refund of Sales Tax for a 6-7 months, or even longer, as was the case in the past. Due to delay in refund of Sales Tax, serious liquidity problems would be created for the cotton exporters resulting in exports of cotton would adversely suffer and compromise the interests of the cotton Growers and Ginners.
The KCA, therefore, strongly urges the Government not to impose sales tax on raw cotton in the forthcoming budget and keep raw cotton exempted from the sales tax in order to avoid adverse repercussions for all stakeholders and the general public.-PR