Exporters hail budget, seek restoration of zero-rating regime

KARACHI: The value-added textile exporters on Monday demanded the government to restore the zero-rated sales tax based on the “No Payment No Refund” system.

A joint statement issued by the Pakistan Hosiery Manufacturers Association (PHMA) and other value-added textile associations said in general, the Federal Budget 2021/22 is better, compared with the previous budgets; however, the textile exporters’ most anticipated demands for the restoration of zero-rating – No Payment No Refund System, reduction in the withholding rate to 0.5 per cent and suspension of Export Development Fund (EDF) surcharge in the Budget 2021/22 was not given due consideration, which has spread dissatisfaction and annoyance among the businessmen.

The imposition of 17 per cent general sales tax has made the textile exporters, especially the small and medium enterprises (SMEs) financially unviable, as their precious liquidity, without any purpose, stuck up and, throughout the year, they face financial difficulties to fulfil their export commitments, pay utility bills and salaries to staff and labourers and also reluctant to take new export orders, the statement said.

It is on record that 33 per cent of SME exporters have closed their businesses, compared with the last year due to the imposition of 17 per cent GST, which blocked the exporters’ liquidity.

With the continuation of 17 per cent GST in 2021/22, many more SME textile exporters, who managed to survive last year, would be forced to closed down their businesses, as well, due to the liquidity crunch.

The government’s export-friendly policy and announcement in the Federal Budget to continue the support to the export sector would remain meaningless unless the major demands of the value-added textile exporters regarding taxation matters are not facilitated.

The associations requested Finance Minister Shaukat Tarin for an immediate meeting on this issue.

The joint statement was issued by Jawed Bilwani, chairman, Pakistan Apparel Forum; Tariq Munir, chairman (SZ), and Faisal Mehboob Sheikh, chairman (NZ), Pakistan Hosiery Manufacturers and Exporters Association; Rafiq Godil, chairman of Pakistan Knitwear and Sweater Exporters Association; Abdus Samad, chairman of Pakistan Cloth Merchants Association; Muhammad Naqi Bari, chairman of Pakistan Readymade Garments Manufacturer and Exporters Association; Feroze Alam Lari, chairman of Towel Manufacturers Association of Pakistan; Khawaja M Usman, former chairman of Pakistan Cotton Fashion Apparels Manufacturers and Exporters Association, Zulfiqar Chaudhry, chairman of All Pakistan Textile Processing Mills Association; Engr Bilal, vice-chairman of All Pakistan Bedsheets and Upholstery Manufacturers Association; Farrukh Iqbal, vice-chairman of PHMA; Dr Khurram Tariq, Amjad Khawaja, and Syed Zia Alamdar, former president of FCCI.

They appreciated that the government has reduced / exempted the Customs duty, additional Customs duty, and the regulatory duty on the import of goods falling under 589 PCT codes to incentivise the textile industry.

However, Customs duty, additional Customs duty and the regulatory duty on disperse dyes PCT 3204.1100, VAT dyes PCT 3204.1590, reactive dyes 3204.1600, and liquid (pigments) 3204.1720 has not been reduced / exempted.

Secondly, under the umbrella of the Export Facilitation Scheme, exemption on the import and zero-rating on local supplies of raw materials, components, parts and plant and machinery to authorised exporters was proposed and the Bond-to-Bond transfer of goods through WeBOC without prior approval of the collector is being proposed to be allowed. However, exemption of utilities – supply of electricity and gas – was not proposed.

Under the streamline measures of the income tax, the government has eliminated the requirement of filing of an application for the automated issuance of refunds, the introduction of time limitation for the disposal of show-cause notices, automated issuance of exemption certificates if the application is not disposed of by the commissioner within 15 days, removed the requirement of updating tax profile and the delegation of powers of the federal government to the board with the approval of the federal minister in-charge.

The value-added textile sector has also submitted to the government to reduce and fix the tariffs of electricity, indigenous gas, and re-gasified liquefied natural gas (RLNG), which was not addressed.

Further, the government has allocated Rs20 billion for duty drawback and tax levies (DLTL) Scheme; however, the case of DLTL, amounting to Rs32 billion, is pending with the State Bank of Pakistan (SBP) and ready for payments to release.

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