LAHORE - The leather sector cannot benefit from the duty-free access to EU market under Generalized System of Preferences unless the government restores zero-rated regime in the upcoming federal budget 2014-15 for export-oriented leather industry to help ease its liquidity flow.
Contrary to the huge potential of leather products, exports of the leather industry have remained stagnant at $1.22 billion for the last six years, said a top industry man, insisting that just a bit of support from the Ministry of Commerce can push exports to $3 billion in three years and make the industry the second biggest after textile. In its proposals for trade policy as well as budget 2014-15 presented to TDAP chief executive SM Munir and a copy of which sent to the FBR, the Pakistan Tanners Association has demanded the FBR to correct date of applicability of SRO 897(I)/2013 from 12th June 2013 instead of Oct 4, 2013.
PTA central chairman Sheikh Saqib Masood asked the government to include hides & skins in 6th Schedule of Sales Tax Act 1990, besides reducing custom duty on basic leather chemicals. The PTA chairman also requested the TDAP chief to make strong recommendation for inclusion of PTA’s proposal for Budget and Trade Policy for the year 2014-15.
He demanded the release of pending Sales Tax claims of PTA’s members, saying that a significant ratio of working capital of leather exporters is stuck-up in refund regime at a time when the leather export has already declined by over 17 percent during the last six years from $1.22 billion in FY 2007-08 to $1.01 billion in 2012-13. The growth rate of leather sector exports was in minus and exports reduced to 14 percent as against positive growth in the region with 47 percent, 40 percent, and 102 percent in China, India and Bangladesh, respectively during the last fiscal year. Pakistan Tanners Association chairman Sheikh Saqib Masood, raising the demand of zero rating, said the government should bring in necessary reforms and give special status to export-oriented leather industry allowing zero-rating facility to achieve desired goal from GSP Plus scheme.
Being mainstay of the economy and major stakeholder in forex earnings, export-oriented leather sector should be given special status, he demanded. “If the government wants to fully utilise the GSP Plus scheme, it should immediately enforce the previous system of zero-rating for export-oriented leather industry which would mean no deduction and no payment of sales tax refund to help ensure cash flow for industry to meet export contracts. After the elimination of zero-rating, sales tax refund of long period by the FBR is still pending.
Hence a huge amount of leather exporters have stuck-up in sales tax refund regime creating severe financial crunch.”
Sheikh Saqib said that zero-rated sales tax facility will help restore the competitive edge in international markets for Pakistani leather goods and will act to uplift the exports of the country and strengthen the national economy. He said that the government may study export policies of India and China where exporters are facilitated through export-friendly policies, he said and added that FBR should announce export friendly policies instead of creating difficulties for the industry. PTA central chairman asked the authorities to take representatives of export-oriented industries on board for evolving an effective and result-oriented trade and export policies that could help achieve desire goal of increasing exports.