Textile sector on Wednesday rejected 17 percent sales tax on local sales and demanded of the government to immediately withdraw SRO 231 (I) 2011. The ministry of finance on Tuesday announced withdrawal of zero rated sales tax facility on the sales of five major sectors including textile aimed at generating more revenue.
An amendment, through SRO 231(I) 2011, was made to the SRO 509(I)/2007 dated June 9, 2007 wherein the government withdrew zero rating of the five zero rated sectors on local sales. According to the amendment new zero-rated facility will only be for those units which are registered as manufacturers-cum-exporters or exporters purchasing goods for export purposes. The amendment shall come into force at once.
With this amendment, manufacturers or producers of these five leading sectors will now have to pay 17 percent sales tax on the local sales. Earlier, complete chain of five major sectors - textile, carpet, surgical goods, leather goods and sports goods - were exempted from sales tax on local as well as export sales, as theses sectors were contributing over 80 percent of their production or manufacturing to export.
Textile sector has expressed sheer surprise over the issuance of Ordinance/Amendment to the SRO 509(I)/2007 dated June 9, 2007 wherein the government has withdrawn zero rating of the five sectors without consulting the stakeholders. A meeting of Council of All Pakistan Textiles Associations (CAPTA) was held here on Wednesday. Zubair Motiwala presided over the meeting.
"This amendment would create enormous problems in the entire supply chain and there are umpteen number of questions arising such as sale of cotton by ginners to spinners which would attract sales tax as ginners are not required nor are the exporters-cum-manufacturers," Motiwala said.
These five zero-rated export sectors are facing hardships due to high prices of cotton and cotton yarn, frequent load shedding of gas and electricity, liquidity crunch and serious law & order situation, he added. Moreover, there are chances of unscrupulous elements coming into the game like under-invoicing, misdeclaration and deliveries without invoicing. All these factors would strengthen the parallel regime and would weaken the government's goal of documenting the sector, he said. He added that large manufacturers would suffer more and many questions would be raised with regard to audit queries by auditors due to this cumbersome amendment, which might result in high number of litigation.
The chairmen of the 11 associations unanimously decided to ask the government to immediately rescind the amendment issued vide SRO 231(I)/2011 dated 15th March, 2011 to SRO 509(I)/2007 and declare the previous SRO 509 (I)/2007 dated 9th June, 2007 as a document without any amendment.
The meeting was attended by representatives of Pakistan Apparel Forum, Pakistan Hosiery Manufacturers Association, Pakistan Knitwear and Sweater Exporters Association, Pakistan Textile Exporters Association, All Pakistan Textile Processing Mills Association, Pakistan Readymade Garments Manufacturers and Exporters Association, Towel Manufacturers Association of Pakistan, Pakistan Cotton Fashion and Apparel Association, All Pakistan Bed Sheets Manufacturers Association, Pakistan Cloth Merchants Association, Pakistan Yarn Merchants Association and others.