Withdrawal of incentives to export sectors: FBR collects Rs55 bn additional taxes in five months

ISLAMABAD: After withdrawal of zero-rating regime for five export-oriented sectors, the Federal Board of Revenue (FBR) has fetched additional taxes of Rs55 billion in first five months (July-Nov) period against envisaged target of Rs185 billion for the whole fiscal year.

During the proceedings of National Assembly Standing Committee on Finance held under chairmanship of Faizullah from the PTI here at the Parliament House on Monday, the FBR unveiled its plan to start implementation on computerised national identity cards (CNICs) condition after receiving Sales Tax returns on March 15, 2020, saying that they were developing a software with the help of Nadra to verify CNIC details through filed returns, whereas the fake CNIC providers would be referred to Benami Wing of the FBR for further investigation and prosecution under the relevant law.

The FBR Member Inland Revenue (IR) Operation Seema Shakil told the NA panel that the FBR has so far sent out notices to about 200,000 high net worth individuals but many people had provided wrong CNIC data. The SBP representative said biometric verification of bank account holders was underway, as 90 percent were now biometrically verified while remaining 10 percent were in process.

The parliamentarians especially belonging to the PML-N including Ali Pervez, Ayesha Ghous Pasha and Qaiser Sheikh severely criticised the FBR for suffocating the economy and were of the view that the Board could not collect the desired revenue target of Rs185 billion after abolishing of zero-rating regime.

“We request the chairman NA panel to arrange another briefing in January, 2020 after passing one half of the current fiscal year to gauge the performance of the FBR on account of withdrawal of zero-rating regime,” Ali Pervez said.

The FBR high-ups briefed the NA committee that after abolishing of SRO 1125, the FBR had estimated to collect Rs185 billion with imposition of 17 percent GST on five export-oriented sectors including textile, leather, carpets, sports and surgical goods. The FBR Member Inland Revenue Policy Dr Hamid Ateeq Sarwar said that the FBR collected Rs61 billion in July-Nov period of the current fiscal year from these five sectors against Rs6 billion through local sale in the same period of the last fiscal, so the additional collection stood at Rs55 billion.

Out of total additional collection of Rs55 billion, the FBR fetched Rs23.6 billion through domestic front and Rs32.3 billion at import stage, he added. The FBR’s Member IR Policy said that the government provided subsidy on gas and electricity to exporters after their agreement to slap 17 percent GST on export-oriented sectors. On this point, MNA Ali Pervez, Ayesha Ghous Pasha and Qaiser Sheikh objected that there was no connection between subsidy on gas and electricity and imposition of GST on five export-oriented sectors.

Dr Hamid Ateeq Sarwar explained that he was not present in the meeting where this agreement was struck between the government and exporters. However, this had come under discussion in the ECC meeting so that’s why he had given statement to this effect before the committee. However, the ministries concerned could be called to get further explanation on this issue, he added.

Ateeq Sarwar said the FBR so far issued refunds to the tune of Rs98.7 billion in first five months of the current fiscal year against Rs31 billion in the same period of the last financial year. He said the FBR provided around Rs70 billion additional refunds in the current fiscal year. He said the the exporters so far claimed refunds to the tune of Rs14.4 billion through FASTER and FBR issued Rs10.8 billion refunds. He said that the exporters were reluctant to fill annexture H of the returns, but the FBR was ready to hear them for resolving their genuine problems.

Ayesha Ghous Pasha said the FBR had jolted the whole system with its actions of too much and too soon as the Bureau should have adopted phase-wise approach instead of withdrawing the SRO 1125 in one go for all major export-oriented sectors.

Ali Pervez said exports stood at $9.5 billion and with existing pace it could touch $23.5 billion so it would not be a stage of celebrating increase in exports. He said the FBR chairman had made commitment at the NA panel to give briefing on abolishing of zero-rating regime when half of the fiscal year passed because it would give us opportunity to analyse the outcome of the decision of imposing 17 percent GST.

Qaiser Sheikh was of the view that exports went up, but refunds amount did not go up to the desired level and observed that rampant corruption was going on related to refunds issues.

The NA panel showed its concerns over rising inflation, especially escalating food prices, as it went up to 17.94 percent on week that ended on December 19, 2019. The Pakistan Bureau of Statistics (PBS) official Behrawar Jan told the committee that SPI captured data of 51 essential food items and it found that the SPI stood at 17.94 percent in December. He said food inflation had now started receding during last few weeks.

The chairman of the NA panel asked Adviser to PM on Finance and Governor SBP to appear before the committee when the inflation report prepared by sub- committee led by Ayesha Ghous Pasha’s will be presented before the committee next time.