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Concern over proposed withdrawal of zero rating regimes

Peshawar

June 9, 2019

MULTAN: Alliance of Recognised Chambers and Association of South Punjab has expressed concern over the proposed withdrawal of zero rating regimes and said that it will have adverse impact on the export industry.

Addressing a press conference here on Saturday, Alliance of Recognised Chambers and Association of Southern Punjab convener Khawaja Muhammad Yousaf, FPCCI former president Mian Tanvir Ahmed, MCCI president Muhammad Sarfraz, Khanewal Chamber of Commerce and Industry president Khawaja Habibur Rehman, APTMA south Punjab chapter convener M Anees Khawaja and APBUMA former chairman Syed Muhammad Asim Shah urged the government to drop the idea of withdrawal of zero rated facility in the best interest of the country.

They said that the withdrawal of zero rating facility for five sectors value-added textile, leather, carpet, surgical instruments and sports goods would result in further decline of exports.

They said that unequal rate of gas and electricity for industrialists of the Punjab, withdrawal of subsidy and increasing the interest rate would ruin the industry, rendering millions of labourers jobless. They added that the withdrawal of the facility would increase the cost of doing business. They further stated that the government should find new avenues for enhancement of its revenue, instead of damaging the exports sector, which was already declining. They said that the industry was seriously concerned on the move as the end exporter would be the worst hit due to stuck up of refunds.

FPCCI ex-president Mian Tanvir said that the regime of zero rating was introduced after due diligence by the FBR after meetings with the stakeholders and verifications by a leading audit company as the government was collecting less sales tax and disbursing more refunds under the earlier regimes when wrong registration of taxpayers and flying invoices was a common practice. It also plagued the system with corrupt practices and ultimately caused a colossal loss to the exchequer, he added. The government had therefore introduced zero rating regime in 2009, which was in practice since then, he added.

Anees Khawaja of the APTMA stated that discontinuation of zero rated status would ruin the export-oriented industry. He said that more than Rs 200 billion of exporters in refunds of sales tax, customs rebate, withholding tax, DLTL & DDT were already stuck up with the government.

Khawaja Muhammad Yousaf said that the proposed scheme to raise revenue from the textile value chain by introducing 17 per cent sales tax and subsequent refund of the same under an already tested, tried and eventually failed system would choke down the entire value chain of the industry and exports due to liquidity constraints. The industry could not afford to obtain funds at an exorbitant interest rate hovering around 15 to 17 per cent, he added.

Farid Mughis A Sheikh said that the industrialists of the Punjab were getting gas/RLNG on double tariff as compared to Sindh and KP. He further said that general sales tax (GST) was in fact a consumer tax, which was to be paid by the people of Pakistan and it could not be applied to the exporters. Khawaja Mehr Ali of Pakistan Tanners Association (PTA) said that they would stop the purchase of animal skins for 10 days if the government stuck to its stance. He expressed hope that sanity would prevail and the policymakers would abstain from halting the production wheel of the export industry.

Khawaja Muhammad Usman said that Pakistan had agreed with the IMF to jack up tax collection target of Rs5,550 billion in the next budget for 2019/20 against the revised projection of Rs4,150 billion. It would require a growth of 35 per cent in tax revenues and it could not be achieved with the status quo approach. Under the IMF programme, the government was committed to do away with zero rating regime for five export oriented sectors, he added.

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