DISCONTINUATION OF ZERO RATING OF SALES TAX “NO PAYMENT NO REFUND REGIME”
Karachi, June 13, 2019: The Value Added Textile Export Sector is highly perturbed and worried on Government’s proposal in the Budget to discontinue Zero Rating scheme by abolishing SRO 1125 as it will be a deadly blow on exporters liquidity which will create hardships for exporters and will eliminate SMEs and exports will decline to approx. 30 percent in the next fiscal year.
To save the Value Added Textile Export Sector, the zero-rated scheme of “No Payment No Refund” of Sales Tax must be continued. The Advisor to PM on Finance in his post-Budget Press Conference has added fuel fire giving misleading figures that the domestic annual sales of the textile sector are Rs1200 billion. As per our estimate, the domestic annual sales is only around Rs250 billion. How come the textile industry, exported goods worth Rs1488 billion only last year during 2017-18 as per the PBS report, can sale worth Rs1200 billion in the domestic market. This was stated by Muhammad Jawed Bilwani, Chief Coordinator, Value Added Textile Export Sector.
Bilwani strongly reacting to the exaggerating statement of Advisor to PM on Finance regarding domestic sales of Rs1200 billion. He was of the view that if we divide Rs1200 billion with our 22 crore population, we can assume that each Pakistan can spend Rs5455 on textile. An average price of textile clothing is Rs700 and 8 suits can be purchased from Rs5455.
Is it possible that every Pakistani (including children) could purchase 8 suits annually where 50 percent of the population is under the poverty line? If we less those Pakistanis which are abroad for education & job purposes and which are in prisons, then figures will be more different. Penitent to mention here that Labour working in rural areas get salaries from Rs3000 to Rs7000.
He further informed that local sales in Textile are around 15 percent to 20 percent while in other export sector is around 2 percent to 5 percent. When Govt. intends to refund the collected amount, why they are collecting? Is a million dollar question. “They are doing this to improve their cash flow and nothing else”.
Bilwani has voiced that the Value Added Export Sectors categorically refused to accept the government’s new tax regime to discontinue zero-rating of sales tax i.e. No Payment No Refund status from Five Zero Rated Export Sectors announced in the Budget 2019-20 whereby 14 percent of exporters liquidity will stick up after every 4 months as one shipment takes 4 months for completion which means 42 percent exporters liquidity will be stuck up in a year.
He also conveyed serious apprehension on proposed enhancement of the rate of minimum turnover tax from 1.25 percent to 1.5 percent in Final Tax Regime (FTR), reduction in tax credit for investment in BMR from 10 percent to 5 percent of the purchase for the tax year 2019 and abolishing tax credit for investment in BMR from 2020 will result in discouragement for the new investments. However, Proprietorship & AOP are not provided Tax Credit on purchase of plant and machinery for BMR since its inception which is clear discrimination.
He voiced that the Government claims that they will Refund of Sales Tax Claims in two months is based on ignorance as it takes minimum 4 months to manufacture of the garment from the date of purchase of yarn and then the Govt. claimed 2 months will start which means the accumulated refund time will go beyond 6 months. It is on record that no Government during the past three decades was able to give refunds on times.
Muhammad Jawed Bilwani, Chief Coordinator, Five Zero Rated Export Sectors stated that Associations of Five Zero Rated Export Sectors including Council of All Pakistan Textile Associations, Pakistan Apparel Forum, Pakistan Hosiery Manufacturers & Exporters Association, Pakistan Readymade Garment Manufacturers & Exporter Association, Towel Manufacturers Association of Pakistan, Pakistan Knitwear and Sweater Exporters Association, All Pakistan Textile Processing Mills Association, Pakistan Cotton Fashion Apparels Manufacturers & Exporters Association, Pakistan Textile Exporters Association, Pakistan Bedwear Exporters Association, Pakistan Cloth Merchant Association, Pakistan Denim Manufacturers & Exporters Association, All Pakistan Textile Sizing Industry Association, All Pakistan Bedsheets & Upholstery Manufacturers Association, Pakistan Weaving Mills Association, All Pakistan Cotton Power Looms Association, Council of Loom Owners Association, Pakistan Leather Garments Manufacturers & Exporters Association, Pakistan Carpet Manufacturers & Exporters Association, Pakistan Tanners Association, Pakistan Sports Goods Manufacturers & Exporters Association, Surgical Instrument Manufacturers Association of Pakistan on Saturday 15 June 2019 at 3:00 pm would stage peaceful protest across the country in all major cities i.e. Karachi, Lahore, Faisalabad, Sialkot, Multan, Kasur & Gujranwala and would also hold a press conference against the harsh decision to discontinuation of Zero Rating of Sales Tax by abolishing SRO 1125 announced in the budget 2019-20.