Lahore - The carpet manufacturers have expressed deep concern over the FBR’s proposal to increase the Sales Tax from 2 percent to 5 percent in upcoming budget on handmade carpet industry, despite the fact that almost 100 percent of carpets produced in Pakistan are exported, providing more than 800 percent value addition to its product.
The industry experts pointed out that Carpet Association has already sent its well thought out proposals to the FBR and Ministry of Finance for Federal Budget 2015-16, requesting them for withdrawal of Sales Tax on carpet industry as was allowed previously because it is 100 percent export industry. He said that high ratio of sales tax on export oriented industry will shrink working capacity of carpet manufacturers, causing a flood of another unemployment in this sector.  They apprised the government that despite the facility of GSP plus status granted to Pakistan the export of the value added carpet Industry is going down continuously for various reasons and the same is likely to decline further if un-friendly treatment is meted out to the exporting industries.  They said that hand-knotted carpet exports have dropped 10 percent to $120 million in 2014, continuing the declining trend for the industry despite getting free market access to European countries. “Pakistan has suffered a huge decline of over 50 percent during the last seven years as hand-made carpet exports have fallen to $120 million from its peak of $320 million, depriving almost 0.5 million people of direct employment.”
PCMEA chairman Usman Ghani strongly opposed the proposed move of the government for irrational increase in Sales Tax upto 5 percent under the prevailing business circumstances within the country, which would stuck up huge working capital of Carpet Sector in the sales tax regime, while refund process is unfortunately quite slow.
SVC Qamar Zia said the exporters are already facing huge liquidity crunch due to large amounts stuck-up with the FBR in respect of their Duty Drawback, Sales Tax and Income Tax claims. The 5 percent sales tax will increase production cost, rendering the sector more un-competitive in the international market, which is already on higher side due to additional import duties by the Turkish government.
Qamar Zia said that the global floor covering market is estimated to be valued at around 15 billion dollars, and Pakistan has a very little share, mainly due to its failure to cope with the changing trends, no research and development activity and the absence of support from the government.