Withdrawal of exemptions disappoints exporters

By Our Correspondent
June 13, 2024
Workers can be seen in a textile factory in Pakistan. — AFP/File

LAHORE: Exporters and businesses have criticized the withdrawal of tax exemptions in the FY25 budget, The News has learnt.


Leading textile goods exporter MI Khurram who operates two spinning and two knitwear composite units was disappointed after listening to the budget speech.

He says that “the textile industry is in bad shape and may not be able to pay the new minimum wage as its energy and power costs have made spinning operational unfeasible. According to him, over one-third mills have closed while the remaining are operating at truncated capacities.” And he fears that the adverse impact of the taxation proposal would lead to further de-industrialization in the country.

On Tuesday, when the finance minister presented the Pakistan Economic Survey 2023-24, he gave an outline of the budget proposals in his speech but the details of taxes were not elaborated.

He has now mandated the exporters to file proper tax returns instead of paying a nominal income tax at the time of exports. In the same way, he emphasized that traders would be forced to pay taxes according to their income.

The withdrawal of most exemptions has confused business owners. While the exact impact of these tax proposals will be evident after the finance bill is studied, the business community thinks that exemptions have been largely withdrawn, and every sector enjoying these exemptions will be affected.

Shahzad Malik who has just imported high-tech Chinese tractors to set up a production plant in Pakistan in collaboration with the Chinese says that “with the withdrawal of tax exemptions, tractor manufacturers will be paying sales tax, making the final price out of reach of small farmers.” Per Malik: the government is paying lip service to agriculture that needs facilitation from the state to go for mechanization.

Former chairperson of the Pakistan Association of Auto Parts and Accessories Manufacturers Nabeel Hashimi has welcomed the imposition of normal duties on expensive electric vehicles. However, according to him, “a similar rationalization of duties is needed on used cars that pay concessional duty on low ITP value while enjoying one percent discount per month on ITP fixed years back. In all other countries the value of the latest price of each model is used in levying whatever tax is in vogue.”

Former president of Saarc Iftikhar Ali Malik says that the country is passing through a torrid time. “We were expecting the budget to be tough but an increase in GST rates would hurt poor consumers. While businesses pass on GST impact to end consumers, the high prices impact the sales of industries as the consumable surplus of households is impacted.”

According to him, “the government should have covered the amount that it intends to collect from this tax through austerity measures.”

Most business owners are disappointed over the proposed increase in petroleum levy and the government’s intention to keep revising power and gas rates upwards.