Karachi, June 15, 2019: Five Zero Rated Export Sectors (Value Added Textile – Sports Goods – Surgical – Leather – Carpet) reject the discontinuation of No Payment No Refund Regime by abolishing SRO 1125 and term this “IMF Budget” as this is against the PTI Manifesto & Export Policy and is a planned conspiracy to destroy the entire export industry, spread unemployment, diminishing foreign exchange earnings and deteriorate the economy.
Previous Governments had imposed 1 percent and 2 percent Sales Tax on Five Zero Rated Export Sectors and imposition of 17 percent by sitting Government is a bomb which will destroy the entire value-added exports, industrial chain, and allied industries. The FBR wants to hide its inefficiency to broaden the tax net and has put the entire burden on the export industry, which is already handling 22 different departments, to collect taxes for the GOP
The imposition of 17 percent sales tax will compel the entire industry to closure. This will compel foreign buyers to shift to other regional competing countries, which will drastically hurt our economy. If the GOP does not pay attention to the genuine grievances, the stakeholders will observe “No Export Days” as a sign of protest.
The export industry is bleeding in wake of severest ever liquidity crunch in the history of Pakistan as more than 200 billion rupees of exporters in Refunds of Sales Tax, Customs Rebate, Withholding Tax, DLTL & DDT are already held up with Government. Discontinuation of No Payment No Refund Regime will further stick up 14 percent of exporters liquidity in every 4 months as one shipment takes 4 months for completion which means 42 percent exporters liquidity will stick up in a year.
It is on record that no Government during the past three decades was not able to give refunds on times due to bad economic conditions. It is clearly depicted that the Ministry of Finance and FBR plan is to collect interest-free money in the shape of sales tax and to meet tax revenue targets and this will put the country’s export at stake. Today in this period of worst economic crisis, how can we pay refunds, they questioned?
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 garments from the date of purchase of yarn and hence the GOP claim to start refund in 2 months is not possible as the total time will be 6-month minimum.
Strongly reacting to the exaggerating statement of Advisor to PM on Finance regarding domestic sales of Rs1200 billion, they clarified that how come the textile industry, exported goods worth Rs1488 billion only last year during 2017-18 as per PBS report, can sale worth Rs1200 billion in the domestic market. They 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. They further clarified that textile exports have increased to 81.42 percent in the last 15 years despite the high cost of manufacturing, energy and water crisis and law and orders issues in the period.
Chairmen and Exporters including workers of five export sectors’ industries staged a peaceful protest at the Karachi Press Club against Discontinuation of No Payment No Refund Regime announced in the Budget 2019-20.
They further added that collecting sales tax and then refunding – is a futile exercise which creates hassles for exporters and also opens flood gates of corruption. No collection and no refund of sales tax from five zero-rated export sectors is a tried and tested formula for increasing revenue and exports.
We must not forget that during the last two decades the Government had tried to undo zero ratings twice but failed miserably, hence, zero ratings was reintroduced. The zero-rated scheme, in consultation with stakeholders, can further be improved for a much better outcome. They added that the Government rather than getting involved in the futile exercise of collecting sales tax and then refunding should focus its energy on broadening of the tax net.
The Chairmen and Representatives of Five Export Sector Association 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 concluded that If No Payment No Refund System is not restored for Five Export Sectors which contribute 70 percent of total Nation’s exports and generate 50% of total Nation’s employment, it will result to a closure of industries, complete chaos, mass unemployment, widespread anarchy, and law & order situation.