Karachi, July 01, 2020: Textile Exporters are fearing that Government in FY2020-21 would not be a in a position to refunds of 17 percent sales tax to exporters as well as customs rebate, duty drawback as of today a huge amount of worth billions of rupees of exporters is still stuck up with the Government which has not been released. Hence, the textile exporters are deliberating whether to operate industries or close down.
Textile Exporters are facing extreme unrest and anxiety as the Government has shut eyes over the common demand of 55 chambers, 26 Associations of five export sectors – textile, leather, carpet, sports good and surgical of Pakistan for restoration of zero rating on sales tax – No Payment No Refund System has been disregarded by the incumbent government, it is happened first time in the history of Pakistan.
The Government has unnoticed the major demands and recommendations of the export sectors of Pakistan which were proposed by the several chambers and associations of the country which is really most surprising and unreasonable. As per the past practice, the government has sought budget proposals from the chambers & trade associations however the trade organization were neither consulted for budget discussion meeting nor their proposals major proposals incorporated in the budget.
Surprisingly, the Government and its economic team has also, first time in the history of Pakistan, ignored the strong recommendations of Standing Committees of Senate and National Assembly which also proposed to provide relief to the export industries. Ignoring and depriving from relief in this budget, the textile export sector which is the backbone of the economy and exports, most labour-intensive sector, also provide huge urban employment to the female workers and particularly to the lower class in the Garment units and highest foreign exchange earner is beyond the understanding.
Textile Industry supports more than 40 allied industries including the businesses of big markets like Jodia Bazar all over Pakistan. Downfall of textile export industry means downfall of 60 percent of national exports, closure of allied industries and big markets and commercial centres and tsunami of unemployment. World Bank Country Director for Pakistan’s statement is published in the local newspaper of June 16, 2020 and stated that exports are crucial to Pakistan’s recovery in these difficult and challenging times of pandemic. This was stated by Muhammad Jawed Bilwani, Chairman, Pakistan Apparel Forum & Chief Coordinator, Value Added Textile Associations.
The Government had also not fulfilled its commitment that exporter refunds might not get stuck up again and Government will devise an automated refund system whereby refund payment will be received upfront in 24 hours in their bank accounts after submission of GD without human involvement so that exporters would not be dependent on the FBR which was made in previous post-budget meeting at Governor House, Karachi in the presence of Imran Khan Prime Minister, Dr. Abdul Hafeez Shaikh Advisor to PM on Finance, Mr. Abdul Razak Dawood Advisor to PM on Commerce & Textile, Hammad Azhar Federal Minister, Dr. Reza Baqir Governor SBP the then Chairman FBR and Chairman Board of Investment.
However, without any orientation / training / seminar, the Govt., without consultation of the stakeholders – exporters, launched FASTER System by which sales tax refunds to be paid within 72 hours electronically. In first 5-6 months, the FASTER system functioned below par and remain inactive and FBR processed claims manually and SBP paid refund on advice of FBR.
Exporters appreciate that former Member IR Operations Seema Shakil had regular interaction with PHMA for consultation and improvements were made in the FASTER System. We have learned that Government has released some payments to exporters against their refund claims on 30th June which is appreciable, however, exporters are of the view that payments against refunds must not be delayed. Still huge amount of sales tax refund amount of exporters is pending under carried forward or deferred.
The value added textile export sector has reached to the verge of disaster due to severest ever liquidity crisis in the history of Pakistan caused due to imposition of 17 percent sales tax in last budget whereby liquidity worth billions of rupees has been stuck up with the Government.
Moreover, the COVID19 has also put the deadly blow on exports and has shrunk 40 percent global business. In view of above, the value added textile sector strongly demands the Government to review its decision and restore zero rating on GST – No Payment No Refund System for textile sector.
If the government thinks zero rating on GST is not possible percentage of GST must be reduced from 17 percent to 4 percent for the textile sector to ease the liquidity problems in view of global recession otherwise the Government will be completely responsible for closure of industries, flight of capital, massive unemployment which will lead to deteriorating law & order situation and shall worsen the economic crisis in Pakistan.
