The government is reportedly introducing textile package in parts to avoid sudden revenue loss under different relief measures to be announced for textile chain, official sources revealed to Business Recorder. According to sources, textile package is likely to be discussed in the ongoing ninth mandated quarterly review under the Extended Fund Facility (EFF) with the International Monetary Fund (IMF).
The government may announce more incentives for textile sector soon after the ninth review is completed this week, while first half of the package is already being implemented to give relief to the sector. Sources said that the government is considering revising the Drawback of Local Taxes and Levies (DLTL) for value-added textile sector. Currently, DLTL is available for exporters of textile products on Freight on Board (FOB) values of their enhanced exports on an incremental basis if increased beyond 10 percent over previous year's exports at the following rates: garments 4 percent, made ups 2 percent; and processed fabric 1 percent.
However the government may withdraw the condition of 10 percent increase and allow the scheme across the board. The government last month agreed with the textile stakeholders to impose a 10 percent Regulatory Duty (RD) on the import of cotton yarn and grey & processed fabric, reducing Export Re-financing Facility (ERF) rate by one percent (100 basis points), reducing rate of Long Term Finance Facility (LTFF) by one percent (100 basis points) while ginning and spinning sectors would qualify for LTFF with effect from November 2, 2015.
The Federal Board of Revenue (FBR) imposed a 10 percent regulatory duty (RD) on eight different types of cotton yarn, including woven fabrics of cotton from November 1, 2015 through S.R.O.1055 (I)/2015 by amending S.R.O.568(I)/2014, dated the 26th June, 2014 on October 30.
The State Bank of Pakistan (SBP) has also notified the revision of financing rates under the Export Finance Scheme (EFS) and revision of LTFF for textile sector with effect from November 2, 2015. Under the EFS, the mark-up rate for textile sector products will be 3.5 percent against the previous 4.5 percent. The revised mark-up rate would also be applicable on outstanding loans of textile sector granted under EFS.
Under the LTFF, the mark-up rates for the borrowers of textile sector will be 5 percent against the previous 6 percent for a maximum period of financing upto 10 years with effect from November 2. Further spinning and ginning sectors have been included in the list of sectors eligible under the LTFF. However, the concerns of the industry about the pending sales tax refunds, withdrawal of various surcharges on electricity like tariff rationalisation surcharge, gas and power availability at competitive prices with other regional countries, withdrawal of Gas Infrastructure Development Cess (GIDC) and restoring zero rated facility are still pending.
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