Value added textile demands zero rated sales-tax regime

KARACHI: The value added textile export sector has demanded the government to revive zero-rated sales-tax regime and reinstate SRO 1125 in its true spirit to address the industries’ liquidity problems.

This was stated by Zubair Motiwala, chairman, Council of All Pakistan Textile Mills Associations and Jawed Bilwani, chairman, Pakistan Apparel Forum in a joint statement on Tuesday.

The associations also submitted their proposals for a relief package to demand the government’s support and relief for textile industries in the covid-19 situation. They said that hardships of exporters in terms of liquidity would multiply in the presence of 17 percent sales tax.

Thus, restoration of zero-rating or exemption from sales tax was crucial, for which SRO 1125 should be revived in true spirit. Under current circumstances, the local markets were closed, the intention of the government to collect sales tax was not being achieved, and by continuing to collect 17 percent sales tax, the government was creating severe liquidity problems for the exporters, they added.

Textile export industry contributes to more than 50 percent of the national exports and provides highest employment being the most labour-intensive. It was also the highest foreign exchange earning sector of Pakistan.

They said industries, especially SMEs were facing severe liquidity crunch and were on the verge of collapse due to complete halt of business activities in this lockdown.

“Therefore, it is requested that payments of all utility bills (power, gas and water) and taxes and levies should be deferred till normalisation of industrial and export activities and due date should be after 10 days of end of lockdown,” they said.

In order to facilitate the export sectors for enhancement of exports, the government had announced power tariff of 7.5 cents/unit on January 2019, which was to be continued till 30 June, 2020, but the government order was not being followed by the K-Electric.

Government should direct the DISCOs, especially K-Electric for strict compliance of tariff and adjust / refund excess amount charged since January 2019 in future bills to resolve liquidity problems, they demanded.

They proposed that the government should clear / release all the pending refund claims of sales tax, custom rebate, withholding tax, duty drawback / DLTL in one go and payments of future claims should be released within one week of submission of such claims.