PRGMEA calls for zero rated regime restoration in budget 2020-21

LAHORE        –           The Pakistan Readymade Garments Manufacturers & Exporters Association, in its budget proposals for 2020-21 submitted to the federal government, has called for restoration of zero rated regime of ‘no payment and no refund of sales tax’ for export-oriented sectors including textile at least for one year to sustain the industry amidst crucial liquidity crunch due to COVID-19.

In the budget proposals, which were also sent to Commerce and Textile Industry advisor Abdul Razak Dawood, PRGMEA Chairman (NZ) Sohail A. Sheikh and Chief Coordinator Ijaz A. Khokhar asked the government to release all stuck-up claims of the exporters, including DLTL, DDT, Customs Rebates and Sales Tax rebates, as the liquidity crunch is a major stumbling block in the way of improving exports.

They said that apparel industry should be allowed to import fabric under the SRO 492 scheme, as the weaving industry of Pakistan is unable to fulfill demand for fashion wear.

“We request to the government to announce complete 100 percent drawback rate of incentive (7%) without condition of increment with simple procedure and paperless working for two years (19-20 and 20-21).”

PRGMEA Chief Coordinator Ijaz A. Khokhar said that the incentive amount should be directly credited to the exporter’s account at the time of realization of export proceeds and SBP may subsequently claim the amount from the government.

Moreover, the last date for submission of claims of duty drawback on taxes (DDT) should be extended, he added.

He demanded a one window operation so that the exporters could focus on the market research and marketing for their products, besides proposing that Cotton Yarn, the major raw material of apparel sector, should be exempted from all duties and taxes to encourage value addition.

Ijaz A. Khokhar also urged the government that the Custom duty of 7 percent on import of Polyester staple fibre including a range of 20 percent anti-dumping duty should be abolished to reduce the cost of production to compete in the market.

PRGMEA Chairman (NZ) Sohail A. Sheikh said that exporters have received just 35 percent of claims payment only, while 65 percent of the refund claims are stuck up with the government, which cumulate 12 percent amount of exporters’ running capital. However, the profit margin of exporters is around five percent to eight percent.

Due to availability of liquidity and smooth cash flow, the confidence of exporters will be boosted to enhance their exports and cement their business ties with the foreign counterparts to capture true business potential, he added.

The government has given assurance to clear all pending claims, but the factual position is that more and more refund claims are piling up with the payment of just a small number of claims.

PRGMEA Chairman (NZ) stated that the government should announce a clear policy to finally clear all the pending refund claims.

“We request that import of fabric to be allowed under SRO 492 instead of DTRE, which is very complicated and only 2% exporter can avail importation under DTRE facility whereas 97% SME sector can be facilitated under SRO-492, which was enforced previously.

To compete with Bangladesh and India; it is very important for Pakistan to offer the same products as they are exporting in large variety.”

Sohail A. Sheikh said that the incentive amount should be directly credited to the exporter’s account at the time of realization of export proceeds and SBP may subsequently claim the amount from the Government.

The condition of “after receipt” should be abolished and prompt payment shall be made. Otherwise, again backlog of payments to be made to exporters shall be created as previous payments of billions of rupees have not yet been made to the exporters.

Since WEBOC system is available then why do we need to submit the hard copies for processing of rebate and DLTL claims.

As soon as the bank may report payment realization on WEBOC, rebate and DLTL claims should be highlighted in Green and entitled for disbursement of refund.

He said that one window operation may effectively be introduced to replace the lengthy procedures that involve interaction of manufacturer with various agencies.

“At the moment, different government agencies have been harassing the textile industry virtually every day. Social Security, EOBI and all other taxes should merge and deducted at source.

The government exchequer will receive more revenue, if a reasonable percentage of realized amount is deducted. And many of the SMEs companies will add in the tax net automatically.”


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