Standing committee recommends zero sales tax on textiles

KARACHI: Standing Committee on Textile Industry in a letter to Federal Board of Revenue (FBR) chairman has recommended zero sales tax for the value-added textile sector in the upcoming Federal Budget 2015-16.
MNA Khawaja Ghulam Rasool Koreja, standing committee on textile chairman, in his letter sent on Wednesday has referred to his discussion with the FBR chairman on sales tax increase from two percent to five percent. He said, “The committee unanimously recommended zero percent sales tax on the entire supply chain of the value-added textile export sector as prevailed prior to March, 2013.”
Moreover, he said in the letter, the committee also recommended ‘no payment no refund’ on textile export sector. “It will be appreciated if the above mentioned recommendations are considered in the forthcoming budget 2015-16.”
The businessmen in general and of the textile sector in particular demanded zero rated sales tax despite the proposal to increase the tax. Value Added Textile Associations chief coordinator and spokesman Muhammad Jawed Bilwani, who is also the chairman of Pakistan Apparel Forum, said zero rate status for the textile sector was necessary to save declining exports. No payment no refund regime should also be revived for the five export oriented sectors to make the exports truly zero rated, he suggested.
He said that pending sales tax refunds, custom rebates, and DLTL claims should be released immediately to ease liquidity, which was restraining exporters from running factories and delivering on export commitments.
Bilwani said the cost of production had increased resulting in the decline of textile exports despite of the duty free access to the European Union granted under the GSP Plus status.Calling the value-added textile sector the economy’s backbone, he said around 54 percent of the exports and 42 percent urban employment were heading towards a disaster.
Bangladesh is fetching $6 billion in value addition per million cotton bales, while Pakistan was adding just $1.17 billion. “If government considers the above recommendations, we can convert our 14 million cotton bales to $6 billion per million cotton bales like Bangladesh; to $84 billion,” he said.
Pakistan Readymade Garments Manufactures and Exporters Association Chairman Ijaz Khokhar said the textile sector’s Rs110 billion sales tax refunds stuck with the FBR created a financial crunch. “If these dues were given in time along with an aggressive market plan the textile sector could have benefited,” he said. “Despite of lack of power and gas, the potential is still there, which has not been cashed properly.”
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Mian Muhammad Adrees said the exports in general and textile sector in particular were facing hardship because of their mounting tax refunds. This liquidity problem forced the sector to arrange working capital through expensive sources, which ultimately hurt their competitiveness in the international market and ability to meet export orders in a timely manner.