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Pakistan

PHMA demands restoration of zero rating on five sectors to enhance exports

Five Export Oriented Sectors have been highly aggrieved due to rescinding SRO 1125 and imposition of 17% sales tax
14 May 2020
  • Five Export Oriented Sectors have been highly aggrieved due to rescinding SRO 1125 and imposition of 17% sales tax on exports with a view to collect sales tax on domestic sales of textiles.
  • Textile exporters who had timely filed their claims of sales tax refunds have received only 35% of their pending sales tax refund held with the Government.
  • 65% of sales tax refunds are carried forward and still pending which cumulate approx. 12% to 15% amount of exporter's running capital.

KARACHI: To enhance national exports & earning foreign exchange, restoration of Zero Rating on Sales Tax - No Payment No Refund Regime reinstating SRO 1125 is highly indispensible for Five Export Oriented Sectors. The current volume of Pakistan exports cannot unsurpass unless the burning liquidity problem being faced by exporters is addressed by the Government.

This was demanded by Chaudhry Salamat Ali, Central Chairman, Mian Naeem Ahmed, Zonal Chairman and Mr. Shafiq Butt Vice Chairman of Pakistan Hosiery Manufacturers & Exporters Association in a joint statement on Thursday.

They said that to achieve a great milestone in enhancement and development of exports, it is crucial that the Government must facilitate the export sector and its policy should be revised from "penalize to incentivize" as the Five Export Oriented Sectors have been highly aggrieved due to rescinding SRO 1125 and imposition of 17% sales tax on exports with a view to collect sales tax on domestic sales of textiles. This unwelcomed move penalized the export sector as their precious liquidity in shape of sales tax refund was held unnecessarily with Government. Textile exporters who had timely filed their claims of sales tax refunds have received only 35% of their pending sales tax refund held with the Government.

However, 65% of sales tax refunds are carried forward and still pending which cumulate approx. 12% to 15% amount of exporter's running capital. Textile Exporters even filing on time sales tax refund claims started receiving refunds after passage of seven months time while after nine months only 75% exporters have received their refunds and 25% exporters’ refund have not yet been released by FBR. The textile exporters do business on a very narrow margin and they can apply for refund only after export of consignment.

Hence, the financial hardships of export industries have multiplied mainly due to imposition of 17% sales tax. In the larger interest of country and to enhance exports to strengthen the economy, the Government in the next Budget must restore Zero Rating on Sales Tax - No Payment No Refund Regime reinstating SRO 1125.

They said that the global economic slowdown has also adversely affected the export sectors of Pakistan. To dampen the effects of COVID19, deserving support and attention of the Government to the export oriented sectors is inevitable. The textile exporters have already faced colossal financial losses during global lockdown which has brought damages to their businesses. Now that the global business activities have started moving towards normalization, many buyers have changed the terms of payments and demand 120 days for payment.

How export Industries can survive in these circumstances when buyers demand 120 days for payments along with 17% sales tax which is refunded after too much delays? Further, many textile export orders have been cancelled amid COVID-19 and global lockdown and in various cases foreign buyers have also refused to collect shipments at the export destinations. Hence, the financial losses to export industries are multiplying every coming day.

In present difficult times during lockdown, export industries are paying salaries to their staff / workers for the survival while the industries are inoperative or working much below their capacity. The situation demands immediate deserving considerations as textile export industry will face another challenge of further increase in cost of manufacturing due to production below capacity which cannot be afforded by SME Exporters and such situation may compel for large scale closures.

Therefore, PHMA demands the Government to accord priority to the Five Export Sectors and facilitate not only these export sectors but also their allied industries / complete supply chain to avoid decline in exports and revive the SRO 1125 and restore zero rating of sales tax "No Payment No Refund Regime" in the larger national interest.

Copyright INP, 2020