ISLAMABAD: The Pakistan Textile Exporters Association (PTEA) has sought ten years’ trade policy, suspension of collection of Export Development Surcharge (EDS) till the current funds are depleted by 75%, freeze for five years on energy prices and removal of unnecessary protection for local polyester fiber manufacturers.
The PETA made these demands as part of its proposals for budget 2025-26, which is under preparation at the Finance Ministry and Federal Board of Revenue (FBR).
Rationalization of advance tax on exports: Proceeds of exports have been made simultaneously subjected to deduction under section 154 and Section 147. Advance tax @ 1% collected by the bank against export proceeds is declared as minimum tax instead of final tax. Simultaneously an advance tax @1% has been levied through insertion of sub-section (6C) in section 147. However, in terms of clause (45A) of Part-IV of the Second Schedule of the Income Tax Ordinance, 2001 local supplies are liable to payment of 1% advance tax on local supplies of textile goods and 0.5% for traders of yarn. Treatment meted out to the exporters is discriminatory and against the principles of equity and natural justice.
Sohail Pasha elected PTEA chairman unopposed
PTEA has proposed the following: (i) advance tax on export proceeds should be reduced to 1% to ease the financial burden on exporters;(ii) Final Tax Regime should be restored for the exporters;(iii) Super Tax should be abolished; and (iv) the current advance tax deduction of 2% under section 153 & 147 makes the effective tax rate to 72.1%, plus exporters of certain tiers have to bear additional super tax up to 10%.
Restoration of Export Facilitation Scheme (EFS) for domestic trade: (i) EFS should be restored for domestic trade, with the consumption period reduced to 1year; (ii) enterprises or commercial importers that do not contribute to exports should be excluded from this scheme; and (iii) utility bills, both electricity and gas, should be zero-rated under this scheme, as exporters generating energy from thermal fuels and coal are already zero-rated.
The PTEA maintains that restoring EFS with a reduced consumption period of one year would provide liquidity and ensure that enterprises contributing to exports benefit, while commercial importers remain excluded. The scheme will significantly help in documenting the entire value chain.
Timely disbursement of refunds: (i) Sales tax refunds must be processed and disbursed within 72 hours as per rule 39F of the Sales Tax Rules 2006 to improve liquidity for exporters; (ii) duty draws back refund should be disbursed in timely manner without any interruption and interval;(iii) mechanism required to process deferred sales tax in 60 days electronically from the generation of monthly RPO. Eliminate manual processing, safeguards/KPI’s be placed in system to prevent any losses to national exchequer; (iii) for the purpose of transparency, data of all outstanding refunds in both heads i.e. deferred sales & income tax/income tax credit must be tabulated at one place, huge outstanding refunds is in manual processing and does not reflect in the system. Roadmap for disbursement of such refunds be given and data be shared with stakeholders;(iv) mechanism required to process income tax refunds in 30 days electronically in true spirit from the filling of annual tax returns; (v) eliminate manual processing; (vi) allocate Rs27 billion for the clearance of pending refunds under DDT, TUF, and markup subsidy; (vi) Input Output Coefficient Organization (IOCO) processing of analysis certificates should be fully digitalized end –to-end; and (vii) issuance of tradable digital scripts to exporters’ input tax should be allowed for a period of one year, similar to the practice in India. This will help resolve exporters’ capital constraints in scaling up exports.
According PTEA, a structured refund mechanism should process refunds within 72 hours (sales tax), 60 days (deferred tax), and 30 days (income tax) through automated processing to ensure efficiency and transparency. An allocation of Rs 27 billion should be made for clearing pending refunds. Expansion of Export Finance Scheme (EFS): The current EFS ceiling through EXIM Bank is capped at Rs 235 billion. This should be increased in phases to at least Rs 1.2 trillion to meet capital requirement.
The PETA argued that this expansion is crucial to enhancing textile exports to $ 35 billion by 2023.
Removal of unnecessary protection for local polyester fiber manufacturers: The excessive protection provided to local polyester fiber manufacturers has caused significant losses to the value-added export sector which must be eliminated to ensure competitiveness and also enable Pakistani exporters to tap synthetic valued-added garments which has highest demand and consumption globally.
The Association further argued that reducing duties in line with regional competitors (Vietnam, China and Turkey) would enhance the value-added textile sector’s ability to compete globally and attract synthetic garment exports.
Sustainable Energy Tariff: (i) A sustainable energy tariff must be announced for a period of at least five years to provide stability and predictability for the export sector;(ii) rationalize charging of UFG on industrial consumers to 0.5 % as actual instead of excessive UFC up to 8% being charged; (iii) remove T&D losses from B3 &B4 tariff having dedicated feeders/grid stations as technically all the units are billed to both tariffs. This is a huge anomaly in current tariff structure;(iv) cross-subsidy in electricity tariffs by the industrial sector, amounting to Rs 125 billion, should be eliminated; (v) cross-subsidy in gas tariffs by the industrial sector, amounting to Rs 150 billion, should be eliminated; and (vi) implementation of WACOG across the country should be prioritized, which will bring the overall gas tariff to Rs 2,4% MMBTU. The Association maintains that a-5-year sustainable tariff policy and rationalization of UFG {0.5%) and T&D charges for dedicated feeders/grid stations will enhance cost efficiency. Bench-marking energy consumption across industries will drive best practices.
Copyright Business Recorder, 2025