Exporters demand immediate sales tax refunds amid government delays

KARACHI: The value-added textile industry is facing significant challenges due to financial mismanagement and anti-export policies of the government.

The genuine sales tax refunds for exporters have been excessively delayed, contrary to the legal requirement to release them within 72 hours of the approval of ERPOs. The shift from a fixed tax regime to a normal tax regime has severely impacted exports, increasing financial grievances for the export sector.

This concern was highlighted in a joint statement from several industry leaders, including President of the Karachi Chamber of Commerce & Industry (KCCI) Iftikhar A Sheikh.The statement condemned anti-export measures, including the discontinuation of regionally competitive energy tariffs and the suspension of the financial matrix covering duty drawback on local taxes and levies (DLTL). These moves have severely affected the viability and competitiveness of the value-added textile export industries.

The cost of energy has nearly doubled, exacerbating the tax burden by increasing sales tax amounts on utility bills and delaying refund claims. The discontinuation of EFS on local purchases has forced exporters to pay additional sales tax on goods intended for export, further increasing the refund burden.

The soaring costs of energy and industrial inputs have driven the export industries to the brink of disaster, adversely impacting national foreign exchange earnings. Currently, the industry is operating at 60 per cent capacity, and the liquidity crunch threatens employment and the future of the workforce in the export sector.

Delays in refund processing, coupled with the misuse of funds generated from sales tax contributions, have exacerbated the issue. Reports indicate that the Federal Board of Revenue (FBR) has halted sales tax refunds to meet September targets, using exporters’ refundable tax monies to cover government liabilities. This practice is deemed unfair and unethical, jeopardizing the survival of export industries.

To save the ailing value-added textile industry and protect exports, it is imperative for the government to honour its commitments and promises. This includes fulfilling the finance minister’s assurances made in the Federal Budget speech and ensuring the timely payment of all genuine sales tax refunds within 72 hours, in accordance with Rule 39(f) of the Sales Tax Rules 2006.

Failure to do so will result in a decline in exports and potential industrial sabotage across Pakistan, for which the government will be held accountable.Besides the KCCI president, the statement was signed by Chief Coordinator of the Value-Added Textile Forum & Chairman of the Pakistan Apparel Forum Muhammad Jawed Bilwani; Zonal Chairman of the Pakistan Hosiery Manufacturers & Exporters Association (PHMA) Abdul Jabbar Gajiani; Chief Coordinator of the Pakistan Readymade Garments Manufacturers & Exporters Association Shaikh Muhammad Shafiq; Chairman of the Pakistan Cotton Fashion Manufacturers & Exporters Association Khawaja Usman; Rafiq Godil from the Pakistan Knitwear & Sweater Manufacturers & Exporters Association; Chairman of the All Pakistan Bedsheets & Upholstery Manufacturers Association (APUBUMA) Syed Asim Shah; Chairman of the Towel Manufacturers Association Syed Usman Ali; among others.