Textile exporters fear bleak future amid excessive delays in sales tax refunds

KARACHI: Valued-added textile exporters showed dismay over excessive delays in sales refunds on Friday, saying the government hadn’t kept its commitment as per sales tax rules and the holdup of refunds of billions of rupees had caused a liquidity crunch for the exporters.

“FBR member IR Operations Malik Amjad Zubair Tiwana has stated in a meeting that the government cannot release sales tax refunds payments against ERPOs [electronic refund payment orders] to textile exporters till the end of December 2022,” Muhammad Jawed Bilwani, chairman, Pakistan Apparel Forum said.

In view of that response, he added, the value added textile exporters were worried and upset as to how the government would keep its commitment for timely refunds, which have been accumulated to billions of rupees.

“Textile exporters are highly perturbed over excessive and unjustified delays in GST refunds against approved ERPOs claims in violation of Rule 39F of the Sales Tax Rule 2006 causing liquidity problems.”

He also claimed that FBR officials hadn't responded to requests and reminders made by the exporters.

“Textiles exporters have questions as to why their GST payments have been mismanaged and utilised by the government elsewhere and they have been penalised to face the liquidity hardships, causing disruption in export production.”

He was of the view that the exporters were stranded in the middle of nowhere and couldn’t decide about future of their businesses in a scenario when the global business was facing slowdown. “The foreign buyers have asked Pakistan’s textile exporters to either stop the production orders in progress or go slow.”

Several cases of cancellation of export orders were also reported causing colossal financial losses to exporters. In that connection, small and medium exporters feared high sense of insecurity and uncertainty, he added.

The value-added textile sector opposed discontinuation of Five Zero Rated Sectors - GST No-Payment No-Refund Scheme previously regulated under SRO-1125 and agreed only on a strict condition that GST refunds shall be released swiftly under FASTER system, whereby the ERPOs should be approved within 24 hours of filing and sales tax refunds shall be release within 72 hours strictly in accordance with the rules, Bilwani said.

Contrarily, the government hadn’t acted as per the rules, he added.

The forum’s chief said the exporters demand the government's support and assurance to release the sales tax refunds within 72 hours or “else restore GST Zero-Rating No Payment No Refund system restoring SRO-1125.”

In case the refunds were made to the exporters, many industries would go for closure, causing massive employment and a capital flight in the country, Bilwani feared.