Pakistan's National Assembly standing committee on textile industry has recommended 2 per cent uniform rate of sales tax, against the proposed 5 per cent by the Federal Board of Revenue (FBR), on five leading export-oriented sectors - textile, leather, carpets, surgical and sports goods in the 2015-16 budget.
The textile industry ministry had proposed the existing two per cent sales tax. However, the value added textile sector demanded the revival of zero-rate regime.
The committee and the national food security and research minister agreed to fix the intervention price of cotton at Rs3,200 per 40kg for the financial year 2015-16 after considering the cost of production. It was further decided to take the provincial Sindh and Punjab governments on board over the mechanism for implementation.
The textile ministry reiterated that the textile sector is the main export earner with 54 per cent share in total exports and 40 per cent share in industrial employment. To remain competitive and at par with regional competitors, the rate of sales tax on supply chain and utilities for the textile and carpet sector may remain the same.
FBR inland revenue operations member Mohammad Ashraf Khan rejected the notion that imposition of sales tax resulted in hampering exports. The increase in the rate of sales tax is under consideration, he said, however no final decision has yet been taken. He admitted the flaws and issues related to the refund system and said that efforts are being made for improvement. He further said that refunds to the tune of about Rs16 billion have been stuck up which would be cleared up by August-end.
The committee members also opposed the increase in the sales tax rate, saying that it will result in increasing the cost of doing business. They further said that in other countries sales tax was not being charged on exports.
Pakistan Apparel Forum Chairman Javed Balvani said that the textile export sector is battling for its survival in the global market against severe competition from neighbouring competing countries due to high costs of doing business in Pakistan. He added that textile exports are declining due to high costs, imposition of 2 per cent sales tax, billions of rupees stuck up with the government in sales tax refund claims and customs rebate and DLTL claims.
He said that instead of coming to help and provide incentives and level playing field as compared to other competing countries, the government is bent on crushing and ruining this vital export sector by proposing further harsh measures including the increase in sales tax from 2 per cent to 5 per cent and imposition of GIDC at Rs100 per MMBTU. He demanded revival of zero-rate status for the textile sector.
