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The country's struggling textile industry has urged the government to eliminate tax on distribution of dividends and align tax rates with other exporting countries.

In its budget proposal for 2020-21, All Pakistan Textile Mills Association(APTMA) has proposed the government to ensure regionally competitive energy rates, elimination of minimum turnover tax for this year and next two years.

Textile sector is also of the view that duty on polyester fiber should be reduced to zero and maintain cotton duty at zero per cent.

The APTMA maintains that zero-rating should be restored, adding that basic contention of the FBR was that since domestic sales constituted 50% of textile output, zero rating led to sales tax evasion to the tune of $12 billion sales. At the time, APTMA had proved that this was a false assertion and this fact has now been admitted by the FBR. The revenue collection agency has now stated on record that the domestic sales of the textile sector only account for 20% of the overall value of textile production of the country.

As a result of the misplaced withdrawal of zero rating, the entire textile industry has suffered immensely and the levy of sales tax in its present form and design has led to almost Rs 20 billion (5-6 months total impact Rs 100 billion) liquidity moving from the industry to FBR.

Other demands of the APTMA are as follows; (i) LTFF for indirect exporters;(ii) make IRIS applicable on government institutions;(iii) exemption certificate to manufacturing concerns;(iv) rate of sales tax on ginned cotton is 10 percent it is therefore suggested that proper suggested that proper amendment should be made and allow the zero rating on purchases of ginned cotton;(v) sales tax suffered on services may be processed by ERS/STARR;(vi) sales tax on building material;(vii) proper amendment should be made in the law to allow input tax credit suffered on purchase of building material such as production hall, warehouses and factory premises which is directly /indirectly used in the taxable activity;(viii) textile spinning sector should be excluded from the purview of section 8B as has been done for other sector through SRO 647(I)/2007 dated 27 June 2007;(ix) deferred RPO's should be processed side by side and ;(x) similar to income tax law, time bar limitation should also be provided under sales tax law for disposing of the case in light of the directions of higher appellate forums i.e. Commissioner - Appeals and Appellate Tribunal Inland Revenue [ATIR].

Copyright Business Recorder, 2020

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