FAISALABAD: The Pakistan Textile Exporters Association (PTEA) has raised concerns over prolonged and indefinite delays in disbursing outstanding refunds totalling Rs328 billion across multiple categories, despite repeated assurances from the government.
Furthermore, the recent withdrawal of Export Financing Scheme (EFS) on domestic trade has placed additional pressure on exporters who are the driving force behind the country’s value chain.
According to the PTEA, approximately Rs55 billion are owed in Sales Tax Refunds, Rs105 billion in Deferred Sales Tax Refunds, Rs25 billion in Duty Drawback, Rs100 billion in Income Tax Refunds, Rs35.5 billion in DLTL/DDT, Rs4.5 billion under the TUF and Rs3.5 billion in Mark-up Subsidies. The PTEA has highlighted that by law, Sales Tax Refunds carrying a high rate of 18% are to be disbursed within 72 hours under Rule 39F of the Sales Tax Act of 2006. However, the refund cycle currently stretches beyond 200 days, far from the intended swift processing.
Notably, recent Sales Tax Refunds have been paid only for Refund Payment Orders (RPOs) issued up to August 25, 2024, with some refunds for non-faster categories only clearing up to September 30, 2024. The budgetary allocation for DLTL/DDT refunds has been insufficient, with only Rs10 billion allocated against a payment liability of Rs38 billion, failing to even cover claims from December 2022.
These delays, along with the high financial burden from interest on pending payments, are hampering the exporters’ ability to reinvest and expand their operations. With textile exports serving as a critical source of foreign exchange for Pakistan, unresolved refund issues are now threatening the sector’s long-term stability and the country’s trade balance.
The PTEA has warned that Pakistan is missing significant growth opportunities in textile exports, despite a 15% month-on-month increase in August 2024. With the export potential estimated at an additional $7-8 billion, double-digit growth could be achieved if the government fulfils its obligations, without seeking subsidies or favours. The PTEA called on the government to expedite the refund process across all categories to enable the exporters to restore financial stability, enhance liquidity and propel the sector towards sustained growth. Immediate action on these outstanding refunds, according to the PTEA, would signal the government’s support for the export sector, helping to restore confidence within the business community.