The Pakistan Hosiery Manufacturers Association has rejected 17 percent sales tax on export industry of textile, leather, carpet, surgical and sports in the federal budget 2019-20, expressing serious concern over the withdrawal of zero-rated facility for the five key exports sectors at a time when refund claims of Rs300 billion already stuck up.
In a hurried called meeting in reaction of the federal budget 2019-20, the PHMA chairman Adil Butt said withdrawal of sales tax zero rating for key five sectors, announced in the budget, would adversely impact the country’s exports, which already were facing many challenges.
The meeting was also attended by the PHMA members and noted industrialists and major textile exporters including Naseer Butt, Sheikh Zafar Mahmood and Abdul Hameed.
The PHMA leadership said withdrawal of this facility would increase the cost of doing business due to 17 percent sales tax and high utility cost, as Pakistan’s exports were already facing a tough competition in the international market due to enormous facilities given by the regional countries to their exporters.
Naseer Butt said the government should find new avenues for enhancement of its revenue instead of damaging the exports sector, which was already on a decline.
Sheikh Zafar Mahmood said that refund claims of exporters amounting to Rs300 billion were already stuck up, creating liquidity crunch for the industry, while uncertain economic environment has slowed down the investment to almost zero. Moreover, the rupee devaluation by more than 30 percent has failed to increase exports.
Noted industrialist Abdul Hameed said that these five sectors contribute 70 percent in exports of Pakistan and contribute significantly in earning foreign exchange and providing employment to skilled and unskilled labour force.
The participants of the meeting suggested the government to facilitate the industrialisation in Pakistan, particularly the agro-based and value-added industries for the enhancement of exports.
They said industry is seriously concerned on the move, as the end exporter would be the worst hit due to stuck up refunds.
Adil Butt said the regime of zero rating was introduced after due diligence by the Federal Board of Revenue (FBR) after meetings with the stakeholders and verifications by the leading auditor A F Ferguson, as the government was collecting less sales tax and disbursing more refunds under the earlier regimes when wrong registration of taxpayers and flying invoices was a common practice.
It also plagued the system with corrupt practices and ultimately a colossal loss to the exchequer, he said, adding that the government had; therefore, introduced zero rating regime in 2009, which is in practice since then.
They said it would lead to corruption in connivance with the dubious FBR officials under the mode of flying invoices, over-invoicing, frauds in refunds, etc.
Due to significant volumes of liquidity being stuck in the form of sales tax refunds, export growth will be severely affected and exports might decline, they added.