LAHORE: Pakistan Textile Exporters Association (PTEA) has demanded from the government to restore zero-rated tax regime for export-oriented textile industry.
PTEA Chairman Sheikh Ilyas Mahmood and Vice Chairman Adil Tahir, in a statement, have said the government should bring in necessary reforms and give special status to export-oriented textile industry allowing zero-rating facility to achieve desired goal from European Union markets through Generalised Scheme of Preferences Plus status.
Being mainstay of the economy and major stakeholder in forex earnings, export-oriented textile sector should be given more special status than other industries, they 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 textile industry which would mean no deduction and no payment of sales tax refund and this would help ensure cash flow for industry to meet export contracts, they said and added that there was no deduction of sales tax to be refunded by the Federal Board of Revenue at later stage up to February 2013. After its withdrawal, huge amounts of textile exporters have stuck in sales tax refund regime creating severe financial crunch.
PTEA Chairman elaborated that payment of sales tax for textile exporters was made zero rated in 2005 on the pattern of “no demand-no refund” in order to get rid of numerous complaints and irregularities and also to avoid fake refund claims. The move brought fruitful results and textile exports gradually increased every year. It jumped from $ 8.9 billion in 2004-05 to $ 13.78 billion in 2010-11.
The first attempt to introduce tax on domestic sales of textile export-oriented sector was made in November 2011 by introducing two sales tax slabs (4% and 6%) under SRO 1058(I)/2011. On strong resistance, Government later introduce a uniform rate of 5% from January 2012 under SRO 1125(I)/2011 and in March 2012, government reduced the rate of sales tax from 5% to 2% on supplies in the domestic market under SRO 154(I)/2013 which further revamped by SRO 221(I)/2013.
At present, the supply chain of export-oriented textile sector, liable to pay sales tax at 2 per cent, has resulted in accrual of heavy sales tax refunds. He said zero-rating withdrawal adversely affected exports at a time when huge amount of sales tax refunds are already stuck with the FBR and exporters are facing liquidity crunch. There is a capital blockage for textile exporters as their major capital remains stuck in refund cycle, causing a major dent to textile exporters. PTEA office bearers urged the Government to accord due importance to precious foreign exchange earning sector. To secure interest of exchequer and to bring the textile exports out of inflationary pressure, zero-rating scheme should be enforced.