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‘Exports to decline by 30% if FBR discontinues zero rating scheme’

‘Exports to decline by 30% if FBR discontinues zero rating scheme’

FAISALABAD: Five Zero Rated Export Sectors are the engines of growth and these entirely documented sectors contribute to more than 70 percent of the national exports. Discontinuation of zero rated status will bring disastrous effects on export oriented industries and will lead to flight of capital, mass unemployment and huge foreign exchange losses. Zero-rating must continue in the larger national interest.

This was stated by Mian Kashif Zia, Senior Vice Chairman, Pakistan Hosiery Manufacturers & Exporters Association, Syed Zia Alamdar Hussain, President, Faisalabad Chamber of Commerce & Industry, Dr. Khurram Tariq, Former Central Chairman, Pakistan Hosiery Manufacturers & Exporters Association, Khurram Mukhtar, Chairman, Pakistan Textile Exporters Association, Zafar Iqbal Sarwar Chief Coordinator Adviser to Prime Minister on Commerce & Textile Industry, Arif Ehsan Malik, Chairman, All Pakistan Bed Sheets & Upholstery Manufacturers Association, Waheed Khaliq Ramay, Looms Owners Association, Rana Talib Hussain, Sizing Association, Abdul Haq, Cotton Power Loom Association,  Ijaz Khokhar, Chief Coordinator, Pakistan Readymade Garments Manufacturers & Exporters Associations representing Surgical, Leather and Sports Goods from Sialkot Industry in a joint press conference held at PHMA House, Faisalabad.

They expressed utmost concern that in absence of Zero Rating, exports will collapse due to mega liquidity crises. Significant volumes of liquidity of exporters is being stuck in the form of Sales Tax Refunds. Export growth will be severely affected and the country may even witness a decline in exports. More than 200 billion rupees of exporters in Refunds of Sales Tax, Customs Rebate, Withholding Tax, DLTL & DDT are already held up with Government.

Discontinuation of zero-rating will also lead to corruption under the mode of flying invoices, frauds in refunds etc. They also conveyed serious apprehension on proposed abolition of Final Tax Regime (FTR) for exporters.

They demanded continuation of the Zero-Rating Scheme in the national interest and uplift of exports. The five zero rated sectors are already documented and contribute 60% of total National exports in addition to  generating 40% of total National employment. Discontinuation of Zero-Rated Status will not only undermine the initiatives of the Government but also discourage investment necessary for growth.

They said Federal Board of Revenue (FBR) officials are trying to improve their cash flow by extracting Rs1,500 to Rs1,800 billion from the exporters. It will  put the five zero-rated export sectors at stake. The production cost of the export industry had already increased due to the interest rate hike as 60% of raw material of the export industry came from foreign countries.

In this situation, the industry will have to  acquire finance from banks at an interest rate of 14% to 15%, and the industry’s cost of doing business will increase manifold if the government imposes the proposed 18% sales tax by eliminating the zero-rated facility.