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Textile industry Monday conveyed to State Minister for Revenue Hammad Azhar and the Federal Board of Revenue (FBR) that the withdrawal of sales tax zero-rating would result in massive smuggling of textile items and raise liquidity crunch up to Rs 700 billion including blockage of sales tax refunds.
Industry sources told Business Recorder that the textile sector met Hammad Azhar and FBR Chairman Shabbar Zaidi at the FBR House to discuss possible impact of withdrawal of zero-rating from five export-oriented sectors.
State Minister for Revenue Hammad Azhar and Chairman FBR Shabbar Zaidi are both trying to understand the issues raised by textile sector about the future impact of the withdrawal of the sales tax zero-rating regime on five export-oriented sectors.
Textile industry has informed Hammad Azhar that the retail outlets are full of smuggled textile products and imposition of the 17 percent sales tax on the entire textile chain would further increase smuggling. There is a need to tax the retail outlets engaged in selling of smuggled goods instead of imposition of the standard rate of 17 percent sales tax on entire local chain, while the FBR should focus on the growing menace of smuggling of textile items being sold everywhere in the country, they said.
The industry is paying Rs 27 billion in the form of taxes to the FBR. However, the FBR is saying that it is getting Rs 15 billion from the industry. The remaining difference of Rs 12 billion has not been withheld by the industry, but has been paid to the government under the head of corporate tax, levies and others. The existing sales tax regime under the local supply chain of textile must continue under SRO1125 and any change would result in total closure of the industry. The imposition of the 17 percent sales tax on textile chain would result into liquidity crunch of Rs 700 billion with effect of stuck-up refunds, the state minister and the FBR chief were informed.

Copyright Business Recorder, 2019

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