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June 16, 2019

Exporters threaten ‘no exports days’ on withdrawal of zero-rated facility

Business

June 16, 2019

KARACHI: Five key export-oriented sectors, driving 70 percent of the country’s exports revenue, joined forces on Saturday to hold protest against the withdrawal of zero-rated regime and warned the government of ‘no exports days’ if the facility is not restored.

Representatives of five export sectors, including value-added textile, sports goods, surgical, leather, and carpet staged protest against discontinuation of no payment no refund regime proposed in the budget 2019/20.

Chairmen and representatives of all the key industry’s associations told media that the withdrawal of no payment no refund system would result in closure of industries and massive unemployment.

Previous governments had imposed one and two percent sales tax on five zero-rated export sectors, but the sitting government slapped 17 percent sales tax on them, which would destroy the entire value-added exports, industrial chain and allied industries, they said.

The exporters said imposition of 17 percent sales tax would compel foreign buyers to shift to other regional countries competing with Pakistan.

If the government does not pay attention to the genuine grievances, the stakeholders would observe ‘no export days’ as sign of protest.

Industrialists said refunds worth Rs200 billion related to sales tax, customs rebate, withholding tax, drawback on local taxes and levies and duty drawback of taxes are already stuck with the government. The exports industry is bleeding in the wake of severest ever liquidity crunch in the history of Pakistan, they said.

The exporters said discontinuation of zero-rated facility would get 14 percent of their liquidity stuck with the tax authorities every four months, which means 42 percent in a year. One shipment takes four months to reach its export destination.

The sectors’ representatives said the governments were not able to give refunds on times due to bad economic conditions during the past three decades.

They said ministry of finance and the Federal Board of Revenue plan to collect interest-free money in shape of sales tax and to meet tax revenue targets by putting exports at stake.

The exporters said the government’s claim of settlement of sales tax refund claims in two months is based on ignorance as it takes minimum four months to manufacture garments from the date of purchase of yarn. Total time would, therefore, be at least six months.

The associations’ representatives also rejected the statement of Finance Adviser Hafeez Shaikh that textile goods worth Rs1.2 trillion destined for exports are supplied to domestic markets. Textile sector exported, in rupee terms, Rs1.4 billion worth of merchandise in 2017/18, they said, referring to the Pakistan Bureau of Statistics’ data. Local sales of textile are around 15 to 20 percent, while they are around two to five percent in other export-oriented sectors.

Textile exports increased 81.42 percent during the last 15 years despite high cost of manufacturing, energy and water crisis and law and order issues.

The industrialists further said collection of sales tax and then refund is a futile exercise, which creates hassles for exporters and also opens floodgates of corruption.

No collection and no refund of sales tax from five zero-rated export sectors is a tried and tested formula for increasing revenue and exports.

Governments had tried to undo zero-rating twice over the last two decades, but they failed and had to reintroduce the facility. The zero-rated scheme could further be improved in consultation with the stakeholders, the exporters said.

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