The All Pakistan Textile Mills Association (APTMA) has suggested the federal government that the turnover tax should be zero percent for the textile sector as was done in budget 2016 for rice mills suffering from global recession at that time.
This will help the taxpayers to manage their cash liquidity better and would not materially affect govt revenues as excess turnover tax payments are adjustable against future corporate tax liability.
These suggestions were made in proposals submitted by the APTMA for the federal budget 2018-19 to the federal government. It is also suggested that the upper cap of corporate tax be fixed at 25 percent which may subsequently be reduced to 15 percent.
Globally, the corporate tax rates have been reduced in the recent years and accordingly in order to align with the best international practice the corporate tax rate be reduced to 25 percent for the tax year 2018 and it is gradually reduced to 20 percent in subsequent tax years.
This will encourage the people switching over to corporate sector which are easily manageable by the companies as well as by the tax offices. Alternatively or simultaneously sector-specific corporate tax rates be introduced as in the case of banking companies and in case of export sectors the corporate tax rates are kept 5 percent lower than the standard rate.
The APTMA strongly demand removal of custom duty on import of coal to be used for generation of energy as well as used for boiler by processing industry as exemption of custom duty on import of coal will reduce the cost of doing business and help those units which were forced to shut down their production activity will become operative again.
Due to increase in price of coal in the international market by 14 percent and devaluation of Pak Rupee by about 10 percent recently, the cost of generation of energy by coal has increased by about 25 percent as compared to the last financial year.
In order to encourage exports, it is submitted that payment of drawbacks be made on the realisation of export proceeds against an undertaking for increase in exports on six monthly basis. For immediate payment of duty drawbacks, total amount be allocated in the budget and reimbursed to the State Bank of Pakistan.
The industry demanded that the gas price in all fairness should be uniform throughout the country at Rs 600/mmBTU including GIDC. Differential for gas price for exporting industry be met from budgetary support. In three provinces, gas is being provided at Rs 600/mmBTU while in Punjab, industry is being given gas at Rs 1300/mmBTU.
Present electricity tariff is Rs 11/kWh which should be reduced to Rs 7/kWh. If the surcharge is cross subsidy and not the theft or inefficiency of the system, it should be withdrawn to make industry competitive and subsidy amount be allocated in the budget.
The association recommended that no custom duty and sales tax be imposed during any time of the year on cotton. The government introduces intervention by imposing custom duty and sales tax on cotton import which is short for industry consumption since last many years for manufacturing goods meant for export. Instead of introducing intervention in free market mechanism, the government should reduce input cost of farmers and increase their cotton out put by providing quality seed and extension of services at regionally competitive prices.
World trade is rapidly shifting to man-made fibre from cotton. Pakistan will lose textile export market share unless polyester prices are rationalised. The government of Pakistan must differentiate between taxing raw materials and taxing finished products. The customs duty on import of PSF should be abolished to encourage product and market diversification.
There is 7 percent customs duty on the import of polyester staple fibre with total import expenses in the range of 20 percent including antidumping duty. So even if import duty is finished, protection in excess of 10 percent will still remain.
The zero-rating of local supplies of the five export sectors was re-introduced in 2016 by making amendment in SRO 1125(I)/2011. However, through SRO 491(i)/2016 dated 30.01.2016 condition (x) of the SRO was substituted providing that no input tax credit or refund shall be admissible on packing material of all sorts. It is suggested that the proviso in condition (x) regarding disallowance of input tax on packing material is deleted. It is suggested that reduced rate of corporate tax are introduced for the export sector in respect of their non-business income such as bank profit, dividend, capital gain and rental income.