The Karachi Cotton Association (KCA) has opposed the government’s plan to impose sales tax on cotton in the 2015-16 Budget to mobilise PKR 50 billion in revenue, the Pakistani media has reported.
KCA chairman Amin Hashwani said in a statement that such a move would be detrimental to the interest of growers and cotton production.
He said that nowhere in the world sales tax is imposed on raw cotton because it inhibits growers from enhancing production and meeting the ever rising demand of raw material by textile industry.
The government has set a target for cotton production for 2015-16 at 15.49 million bales. Pakistan could end up with exportable surplus of around one million bales.
The KCA chief argued that since 80-85 per cent of cotton crop is exported in the form of raw cotton, cotton yarn, cotton fabrics or value-added made-ups but upon levying sales tax on cotton it would have to be refunded at the export stage.
For the collection of sales tax on cotton, the government would be incurring huge expenses and will also bear administrative cost for refund of payments and thereafter insignificant amount of tax would be left with the government.
He said cotton is a highly priced commodity and exporters usually operate on small margins. Sales tax refunds can stretch for a period of six to seven months, and that delay can leave exporters short of money to run their business.
The KCA chairman urged the government not to impose sales tax on cotton as it would have adverse repercussions for all stakeholders.
