Lahore - As the FBR, in its budget proposals, has sought to impose a uniform rate of 5pc Sales Tax on all export-oriented industries by amending the concessionary regime under the SRO.1125 in the Budget 2015-16, representatives of different associations of the zero-rated export sectors from Lahore, Sialkot, Karachi and Faisalabad have warned the government of a complete industrial shut down if the Federal Board of Revenue raised the sales tax.
Export sectors’ different bodies included Pakistan Readymade Garments Manufacturers and Exporters Association, Pakistan Hosiery Manufacturers Association, Pakistan Gloves Manufacturers Association, Pakistan Surgical Instrument Manufacturers Association and Pakistan Apparel Forum.
Addressing a press conference here at a local hotel, Chairmen of five Export Sectors’ Associations including the Value Added Textile Associations express strong resentment and vehemently oppose FBR’s proposal for increasing Sales Tax on Five Export Sectors from 2pc to 5pc.
"Exports globally are zero-rated but not in Pakistan," Chairman, Pakistan Apparel Forum, Muhammad Javed Bilwani said. He stated that as the Government is unable to refund the amount of Sales Tax collected from the Export Sectors, it is their demand that there should be no Sales Tax on exports and even the current 2pc Sales Tax should be withdrawn and the “No Payment No Refund Regime” be revived just because globally there is no Tax on Export Sectors and export goods are manufactured for the foreigners and foreigners are not to be taxed.
He said that exports anywhere in the world are always zero-rated except Pakistan, where domestic support was also not given to the textile sector.
“Processing mills in Punjab received gas only three days a week, resulting in delay in the production, which affected the shipment and buyer preferred Bangladesh and India over Pakistan. Textile sector’s Rs110 billion are stuck with the Federal Board of Revenue as sales tax refund.”
Our regional competitors including Bangladesh, China and India have announced incentives and support after GSP Plus status announced for Pakistan.
PRGMEA vice chairman Malik Naseer and Pakistan Hosiery Manufacturers Association (PHMA) Senior Vice Chairman Usman Jawad said that these regional countries are providing rebates, zero rating facility, institutional support, capital investment support, taxation subsidy, low interest rate support, cluster development schemes, facilitations in setting up new plants and long term policy support to the export industry just to improve foreign exchange. On the other hand, Pakistan’s export industry is facing the highest markup rate and highest power tariff in the world amidst insecure working atmosphere due to terrorism with no zero-rated facility.
Malik Naseer said that Pakistan has failed to improve growth rate of textile sector under the European Union’s GSP Plus status because of lack of planning and other domestic hurdles mainly created by the government itself. Our economic managers, instead of promoting export for real economic growth, are depending on browed money of IMF. Our reserves have touched the figure of $18 billion but this is the loan of international donors, he warned.
The exporters from Sialkot, Lahore and Karachi said that the Value Added Textile Exporters are already greatly burdened and crushed due to rising tariff of electricity, gas and other essential raw materials leading to higher cost of doing business in Pakistan as compared with our competing countries. Huge amount of the harassed exporters’ liquidity is blocked in Sales Tax Refund claims amounting to Rs.70 billions; Customs Rebate Claims of Rs.10 billions and Rs.160 Billions in DLTL Claims and Textile Policy 2009-14 initiatives which are held up by the Government since an abnormally long period of time.
They said that total Rs.240 billions of the Five Export Sectors are held up by the Government.
While Pakistan has the GSP plus status under the belt, Textile Exports of Pakistan have gone down by 16.23pc in March 2015 as compared with previous year’s month while overall exports have gone down by 13.44pc. From this, it is crystal clear that any increase in rate of Sales Tax would further lead to decline in the exports of Pakistan which would result in decline in foreign exchange earnings and increase in the Trade Deficit leading to further imminent shifting of large number of industries abroad causing mass unemployment, worsening law and order situation and chaos.
FBR should spread their tax net wide to bring in more taxpayers rather than to punish the genuine taxpayers, the foreign exchange earners.