Prime Minister Imran Khan on Thursday told the textile industry that the government was ready to resolve its genuine concerns but revival of zero-rating regime was no more an option in the current situation.
The government has withdrawn the zero-rated regime for five sectors — textile, leather, carpets, sports and surgical goods — and imposed a standard sales tax rate of 17pc on all items.
The Federal Board of Revenue (FBR) believes that the change in the tax regime of the five sectors will raise an additional Rs75 billion.
Minister of State for Revenue Hammad Azhar told Dawn that a delegation of textile and clothing sectors as well President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Daroo Khan Achakzai along with other businessmen called on Prime Minister Imran Khan.
The premier, he said, informed the delegation that his government was willing to resolve all issues of the industry arising in the post-zero rating regime, but the scheme would not be revived now.
The prime minister stressed the need for effective collaboration between the government and business community to overcome the current economic problems. Mr Khan said promotion of business activities and the manufacturing sector was top priority of his government.
The delegation assured the premier that the business community would stand by his government’s economic reforms agenda and fully cooperate to take forward the process of economic reforms.
A press release of the textile sector claims that during last 10 years exports of five zero-rated sectors had gone up by 37 per cent in terms of value. However, due to the devaluation of the rupee over the past four months, exports had increased but in quantity only.
The textile industry exports more than 80pc of its products. To collect sales tax on remaining 20pc from the textile manufacturing sector is not feasible and saner thing to do. The industry proposed to the government to get tax from goods sold in the local market and the same should be collected by registering wholesale and retail sectors. Disturbing the manufacturing sector for mere 20pc would not be a wise decision.
The export industry is already facing severest ever liquidity crunch as more than Rs200bn of refunds of Sales Tax, Customs Rebate, Withholding Tax, etc are held up with the government.
Meanwhile, the delegations of FPCCI led by its president Daroo Khan Achakzai and the All Pakistan Textile Mills Association held separate meetings with Prime Minister’s Adviser on Finance Dr Abdul Hafeez Shaikh.
They discussed technical issues which were not considered in the budget.
Dr Shaikh briefed the industrialists about the economic priorities of the government. He told them that the government had taken austerity measures by reducing its expenditure up to Rs50bn as well as cutting the salary of the prime minister and his cabinet members.
The adviser said that the initiatives had been taken to curb external and fiscal deficit by reducing the expenditure and enhancing the revenue. He urged the business community to support the government in its endeavours to boost the economy.
During the meeting several proposals of the business community were considered and approved to be made part of the Finance Bill.
The meeting approved the business community’s demand to develop criteria in which a person is not repeatedly selected for audit without any definite information about tax evasion.
FBR chairman Shabbar Zaidi assured the business community that a new system would be introduced to issue refund to the exporters at the time of export. The meeting agreed to streamline the DTRE (Duty and Tax Remission for Exporters) system for the importers so as to discourage misuse, if any.
The meeting agreed that no action would be taken against the taxpayers on the basis of any wrong information with respect to CNIC. However, the condition of CNIC, for invoice, will be continued with an object to document the economy. Regarding the commercial imports, the meeting approved the proposal of the business community to do away with presumptive tax on commercial imports.
The leaders of five value-added sectors have threatened to go on strike if the government withdraws zero-rated regime on their exports in the 2019-20 budget to be unveiled on Tuesday.
Addressing a press conference at Karachi Press Club on Monday, they said the withdrawal of this facility would serve no purpose and result in a liquidity crunch for the export-oriented sectors.
They alleged that all of this was being done to create liquidity for the government at the cost of country’s exports, which engages over a workforce of over one million people.
The representatives of these five sectors — textile, sports, surgical goods, leather and carpet — were critical of the government for taking such a decision at a time when exports are about to take off as a result of devaluation.
According to them, the initial impact of the recent rupee devaluation saw exports rise by 29 per cent in terms of rupee and 0.2pc in dollar.
They claimed that during negotiations with the government, it was initially stated that 16-17pc sales tax would be imposed on exports to be refunded later. However, the last offer put that figure only at 7.5pc.
Responding to a question, Zubair Motiwala — leader of the forum of five-zero rated sectors — said currently only 20pc of textiles constitute local sales, 1pc carpets, 5-7pc surgical goods whereas leather goods are all exports.
