Budget proposals 2019-20: APTMA seeks permission to procure gas under zero rating facility

In its budget proposals, the All Pakistan Textile Mills Association (APTMA) has demanded permission to procure gas under zero rating facility for taxpayers who applied for it under the STGO No. 18 of 2007.
The proposals submitted by the APTMA for the federal budget 2019-20 to the federal government suggested that applications of tax payers may kindly be processed on priority and be included in STGO 18 of 2007 without any further delay.
The facility should be given to all those units who are generating power for exclusive use of their associated company/sister concern for manufacturing and supply of textile and yarn products as it is available to the registered persons mentioned in the STGO No.18 of 2007.
The Association suggested that the proviso in condition (x) regarding disallowance of input tax on packing material is deleted. The packing material of value added textile goods is a commercial requirement of business and reasonable expenses have to be incurred on the packing material.
The disallowance was made only in the context that the reduced rate local supplies was being zero-rated once again and concession was intended to be compensated somewhat through this disallowance for which there is no legal rationale.
It is suggested that Federal Board of Revenue, Punjab Revenue Authority and Sindh Revenue Board should integrate data so that due refund and adjustment is not delayed.
It is also suggested that on failure to pass the order within sixty days, the refund order is deemed to be passed and compensation / additional payment for delayed refund provided under section 171 is made applicable from the date of deemed refund order.
The provision under section 170(4) for filing appeal in case of non processing of refund claim is deleted being infructuous.
Unlike sales tax there is no electronic processing of income tax refund though the electronic data of tax deduction / tax payment is readily available with the Department. Rather the income tax refunds are processed manually and the deadline given is never adhered with. The remedy of filing appeal to the Commissioner (Appeals) for not passing order within sixty days is not an adequate and efficacious remedy as Commissioner (Appeals) can only issue direction for processing the refund claim.
Therefore, it is imperative that electronic processing of refund is prescribed in the rules on the pattern of sales tax and in case of failure to pass the order within sixty days the refund order sanctioning claimed refund is deemed to be passed with accrual of additional payment for delayed cheque.
Tax Credit under Section 65E should also be extended to investment in factory building and manufacturing related infrastructure as appearing as addition in fixed assets. The Rationale behind this is that expansion of plant or undertaking a new project involves investment in factory building and manufacturing related infrastructure and as such these types of investments should also be made eligible for tax relief.
The positive measure of issuance of exemption certificate on imports by Commissioner was introduced in Finance Act, 2013, however, the SRO needs to be revisited as under the current SRO, practically no exemptions have been granted. This leads to excessive collection of income tax at the time of import of machinery and hardship of blockage of funds.
The condition (v) (a) and (b) state that no tax is likely to be payable on income. At times officer refuse the certificate that minimum tax under section 113 is payable and the condition is not satisfied. The condition is actually tax on income and not the minimum tax. Therefore, the language of condition (v) ought to be made explicit stating that no tax is likely to be paid other than minimum tax.
Furthermore, in clause (V) sub-clause (b) after the word depreciation allowance following be inserted "or the tax liability is lower than tax refunds and paid advance taxes".
The rational behind this suggestion is to encourage capital investment in the country exemption certificate under section 148/159 for Import of Machinery by Industrial Undertaking be allowed. In the past, this problem was taken care of by granting exemption certificates on yearly basis.
Moreover for issuance of exemption certificate there is no prescribed time limit and hence the issuance is delayed inspite of consistent follow up. Most of the refunds of the industry are on account of non-issuance of exemption certificate for import of machinery / parts / raw material.
It is proposed that the requirement for Commissioner's approval for revised return may be made easy in cases where no refund is enhanced or no liability is decreased to avoid hardship faced by the registered person. Further, there should not be any restriction of revision of tax return if adjudication proceedings are not initiated against the tax payers. As far as time period is concerned, it should be made within the period of six months of filing of original return and after that six months approval may be required from the concerned commissioner. This will also correspond with Section 7(1) which states that input tax can be claimed for any of the six succeeding tax periods.
It is suggested that the rate of minimum tax under section 113 is reduced to zero percent for local supplies of units qualifying special sales tax regime under SRO 1125(I)/2011. Even otherwise, the general rate of 1.25% is too high and ought to be reduced to 0.5% for the revival of textile sector. There is precedent of similar relief given to the rice mills in year 2016 as the sector was suffering from global recession at that time.
This will help the taxpayers to better manage their cash liquidity and in turn increased turnover. This would not materially affect Govt. revenues due to increase in turnover.
APTMA demands that either the General Rate of 1% for deduction on realization of import proceeds etc. is reduced to 0.5% or slabs are introduced wherein value addition and higher export proceeds are subjected to reduced rate. It also demands that either standard rate of 30% is brought down to 25% or reduced rates are prescribed sector-wise especially for the textile sector.
It is suggested that on failure to pass the order within sixty days, the refund order is deemed to be passed and compensation / additional payment for delayed refund provided under section 171 is made applicable from the date of deemed refund order. The provision under section 170(4) for filing appeal in case of non processing of refund claim is deleted being infructuous.
Unlike sales tax there is no electronic processing of income tax refund though the electronic data of tax deduction / tax payment is readily available with the Department. Rather the income tax refunds are processed manually and the deadline given is never adhered with. The remedy of filing appeal to the Commissioner (Appeals) for not passing order within sixty days is not an adequate and efficacious remedy as Commissioner (Appeals) can only issue direction for processing the refund claim.
Therefore, it is imperative that electronic processing of refund is prescribed in the rules on the pattern of sales tax and in case of failure to pass the order within sixty days the refund order sanctioning claimed refund is deemed to be passed with accrual of additional payment for delayed cheque.
APTMA demands that Tax Credit under Section 65E should also be extended to investment in factory building and manufacturing related infrastructure as appearing as addition in fixed assets. The rational behind this is that expansion of plant or undertaking a new project involves investment in factory building and manufacturing related infrastructure and as such these types of investments should also be made eligible for tax relief.
It is proposed that the initial depreciation allowance rate be restored to 50% for plants and machinery as was the case prior to the Finance Act 2014. The initial depreciation allowance for building also be restored to 25% as was the case prior to the Finance Act 2014. Whereas for the export sector the tax credit under section 65B ought to be doubled for cases whose exports are over 80% of their total turnover so that instead of initial depreciation allowance they are entitled to higher tax credit.
To promote industrialization in the country, government should facilitate the investors to invest in the new projects as well as expansion of existing industrial concerns.
Moreover, the taxpayer falling under the presumptive tax regime ought to be compensated for not claiming initial depreciation allowance on additions in fixed assets.
It is suggested that Federal Board of Revenue should develop its skills to tax the income rather than transactions. Secondly, so long withholding regime continues it start-introducing paying collecting charges to the W.H agents to bear the cost on furnishing accounts and filing the W.H statements. Commissioner (Appeals) should be empowered to grant stay till decision of appeal.
The APTMA also suggested changes in Custom tariff rates demanding inclusion of Raw Cotton in the ambit of SRO 1125(I)/2011.
There is 7% customs duty on the import of polyester staple fiber with total import expenses in the range of 20% including antidumping duty. So even if import duty is finished, protection in excess of 10% will still remain.
World trade is rapidly shifting to manmade fiber from cotton. Pakistan will lose textile export market share unless polyester prices are rationalized. GOP must differentiate between taxing raw materials and taxing finished products. Customs duty on import of PSF be abolished to encourage product and market diversification.
The Association proposed that Natural Gas Genset should be allowed to be cleared under 5th Schedule if importer is a textile unit operating under Ministry of Textile. Further Capital Goods should be added in SRO 630(I)/2018, so that 2% additional Custom Duty is not levied on import of textile parts, accessories etc. Exemption of Natural Gas Genset from Custom Duty and Additional Custom Duty will reduce cost of import resulting in cost of doing business will reduce.