Five percent ST on imported raw materials: PCDMA criticises FBR decision

The Pakistan Chemicals and Dyes Merchants Association (PCDMA) has strongly contested the decision of Federal Board of Revenue (FBR) for imposing 5 percent sales tax on import of 148 raw materials, dyes/chemicals and goods under revamped zero-rating scheme, to be announced by the Board in coming days.
Industry sources told Business Recorder here on Friday that the FBR has drafted revised SRO for introducing a uniform rate of 5 percent on the local supplies to the five export-oriented sectors. In this regard, the input of the said association is necessary as most of the inputs and raw materials have been imported by commercial importers. The FBR has finalised the revised sales tax zero-rating regime without consulting the PCDMA. The FBR is planning to issue the notification in the next few days, after getting it vetted from Law and Justice Division, but the concerned association has not been consulted.
According to the new notification, the goods imported by the registered commercial importers shall be charged to sales tax @ 5 percent of the value. This would create a serious distortion in the system in view of the fact that the FBR intends to charge higher rate of 5 percent sales tax from commercial importers for unknown reasons. Sources said that the FBR had only consulted leading and top textile units and no viewpoint has been taken by the PCDMA before finalisation of the new sales tax zero-rating regime. The commercial importers are working as main supply source of raw materials for textile and other export sectors.
In a letter to FBR Chairman, the PCDMA said that the association is the sole representative body of importers of dyes and chemicals supplied to textile and other related export-oriented industries. It has over 1300 members throughout Pakistan all of whom are taxpayers and registered with sales tax and income tax authorities. The association members form an essential part of the supply chain of the five zero rated export sectors. The FBR is contemplating issuance of amendment of the SRO and tax authorities consulted stakeholders ie trade bodies/associations, but the PCDMA has not been consulted at any stage.
Here it is pertinent to point out that despite a lapse of many months, the association has failed to receive the reply against letters and e-mails seeking clarification on some issues relating to SRO 283. As the PCDMA is one of the major stakeholders in the export sector supply chain, this association must be taken on board for the consultation on proposed amendment in the subject SRO. This shall ensure smooth implementation of the amended SRO, without affecting business activities and resulting in higher revenues for the government, the PDCMA added.