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FBR wants, exporters oppose hike in ST for zero-rated sectors

FBR wants, exporters oppose hike in ST for zero-rated sectors

ISLAMABAD: The five leading export-oriented sectors particularly textile sector is strongly against the likely hike in sales tax rates on textile, leather, carpets, surgical and sports goods in the new budget as the sector through the Textile and Industry Ministry has proposed zero-percent sales tax on the sector.

During the budget preparation exercise for 2014-15, the Federal Board of Revenue proposed that sales tax rate of industrial input to be raised from 2 percent and 3 percent to 5 percent. The sales tax rates for finished products are proposed to be increased from five to 17 percent. Likewise, supplies made to unregistered persons may attract 17 percent sales tax instead of any other reduced rate. The sales tax rate of value-addition sales tax on commercial importers has been proposed to be increased from two to three percent, sources said.

On the other hand, the Ministry of Textile and Industry has strongly urged the government to introduce zero-percent sales tax on textile sector under SRO 1125 instead of multiple sales tax rates on export-oriented sectors. According to the stance of the Textile Ministry, there is no justification to block exporters” liquidity by collecting enhanced rates of sales tax from textile and later paying back in the form of refunds after cumbersome sales tax procedures. The Ministry therefore supports exporters” demand to re-introduce no payment no refund policy.

On the other hand, the Ministry of Textile and Industry has strongly pleaded the case of the textile sector with the Ministry of Finance and opposed the proposal for increase in the rates. It is to be noted that SRO 1125 is the only major export-related SRO specifically dealing with export-oriented sectors and applies multiple rates of sales tax on exports. However, the FBR is proposing amendments to the SRO 1125(I)/2011 to revise sales tax structure on textile, leather, carpets, surgical and sports goods in the upcoming budget.

The chairmen of all the Value-Added Textile Associations are of the consider view that the government is contemplating imposition of Sales Tax on exports which is indeed the most alarming and distressing for the Value Added Textile Exports. In joint statement issued here Pakistan Apparel Forum Chairman M Jawed Bilwani, Pakistan Hosiery Manufacturers & Exporters Association Chairman Irfan Z Bawany, Pakistan Cotton Fashion Apparel Manufacturers & Exporters Association Chairman Khwaja Muhammad Usman, Pakistan Knitwear & Sweater Exporters Association Chairman Kamran Chandna, Pakistan Readymade Garments Manufacturers & Exporters Association Chairman Arshad Aziz, Towel Manufacturers Association Chairman Iftikhar Ahmed Malik, Pakistan Cotton Merchants Association Chairman Abid Chinoy, All Pakistan Bedsheet & Upholstery Manufacturers Association Chairman Syed Muhammad Ahsan and the Pakistan Denim Manufacturers & Exporters Association chairman urged the government not to raise sales tax on the already overburdened industry to help it cope with the prevailing crises.