Value-added textile sector demands revival of zero-rating regime

KARACHI: Textile exporters asked the government to restore zero-rating regime for five-export oriented sectors on Thursday, saying ongoing economic uncertainty and stuck refund claims had put them on the verge of closure.

Value-added textile associations held a joint press conference at Pakistan Hosiery Manufacturers and Exporters Association (PHMA) House Karachi, demanding the government restore the GST No-Payment, No-Refund System previously regulated under SRO-1125.

“Textile exporters are highly perturbed over excessive and unjustified delays in GST refunds against approved Electronic Refund Payment Orders (ERPOs) claims,” officials from PHMA, Pakistan Apparel Forum, and Pakistan Knitwear and Sweaters Exporters Association said.

The Federal Board of Revenue (FBR) was violating GST rules to timely release the refunds, they added.

“According to an estimate, the stuck-up sales tax refund claims amount comes to around Rs300 billion,” the joint pressure said.

In view of an uncalled-for response from the FBR, the value-added textile exporters were worried and upset as to how the government would keep its commitment to timely refunds, which have been accumulated to billions of rupees stuck up with the government, they said.

In the existing sales tax regime, the explained, the value-added textile exporters pay sales tax in the purchase of industrial inputs for goods meant for export, whereby they pay sales tax and such goods are kept in the warehouses.

On average, an export shipment takes at least three to four months time for completion and shipment. After shipment, exporters file sales tax refund claims, which are approved in a specified time.

In this manner, the sales tax amount accumulates to 40 to 50 percent, according to the exporters.

The associations said they had approached the high-ups in Islamabad for the issue of the stuck refunds but had not received any affirmative response.

They warned that if the zero rating system was not restored, the government would be held responsible for closure of industries, flight of capital, and massive unemployment, which would not be in the interest of the country.

A large number of textile exporters have informed their respective trade associations that they have been recently facing inconvenience and inordinate delays in the payment of sales tax refund claims under FASTER system that were filed in the month of August 2022 while their e-RPOs were generated, approved and released from October 16, 2022 to November 23, 2022 but payment against the approved refunds claims have not been released in the specified timeline.

Billions of rupees of textile exporters from all over the country are reportedly held up in sales tax with the FBR. As a result, the exporters have been facing severest financial hardships and are unable to procure materials/inputs for manufacturing goods meant for exports.