LAHORE - The Rice Exporters Association of Pakistan (REAP) has asked the government to award the second-largest export-oriented industry a zero-rated sales tax status, as exporters are facing liquidity crunch in the face of pending tax refund claims.

REAP Central Chairman Chaudhry Samee Ullah, while talking to The Nation, said that apart from textiles, rice exports were much ahead of other four export-oriented sectors. He feared that neglecting this sector would discourage rice exports and the country would lose its traditional markets. “The government should declare rice as a separate industry and place it under zero-rating regime along with five major export-oriented sectors,” he added.

Samee observed that the REAP members are terming the liquidity crunch a major stumbling block in the way of improving exports, as huge amounts are still stuck in refund claims with the Federal Board of Revenue (FBR), squeezing finances and causing cash-flow problems. He said that the restoration of zero-rated tax regime last year in January by the government for five sectors – textile, leather, carpet, sports goods and surgical goods, was a right step in right direction but excluding the second biggest export-oriented sector of rice from this facility, amid record high trade deficit, is a question mark.

The REAP chairman said that the association has already written letters to the finance minister and commerce minister, pressing them to count the sector among zero-rated exporting industries and exempt the rice exporters from sales tax and income tax on utility services. He said that rice exporters contribute a major share to the country’s export earnings and are providing direct and indirect employment to millions. He said that rice is the second largest export commodity, but despite earning $2 billion annually, exporters are not being given benefits while exporters of other commodities are facilitated.

The REAP chairman pointed out that the exporters had been facing unprecedented challenges for years and consequently their capacity had been severely impaired. Exports, both in terms of volume and value, could not pick up pace and currently stand below the target. Absence of the zero-rated facility and imposition of sales tax are detrimental to the business activities.

Samee said the government would have to go for ‘no payment no tax’ policy to ensure corruption-free export trade and encourage exporters. There is no logic in first paying taxes and then getting refunds of the same, he added. This results in corruption, blocking huge working capital of export trade. As exporters funds are held back by the Federal Board of Revenue (FBR), they had to go for bank borrowing and pay extra amount towards mark-up.