PYMA opposes 2.5 percent additional RD on yarn

KARACHI: Pakistan Yarn Merchants Association (PYMA) Chairman Danish Hanif has expressed frustration at the government for not providing relief on imported raw materials to the textile industry and SMEs in Budget 2020-21, while opposing the imposition of regulatory duty of 2.5 percent.

He termed the move disastrous for the textile sector and SMEs, both, a statement said on Wednesday.

In an appeal to Prime Minister Imran Khan, PYMA chairman requested not to impose RD on the raw materials of the textile sector to get the domestic industries out of COVID-19 impact and to promote industrialisation.

The government should provide equal opportunities to all sectors of the economy to meet the challenges of the devastating effects of COVID-19, and create employment opportunities. He urged the government to provide equal business opportunities on the basis of a uniform policy for the export, import and industrial sectors.

“Polyester filament yarn is an important raw material for weaving, knitting and home textiles. Most of the needs, about 70 percent, of the user industry are met by imports because the local manufacturers only produce basic specs and are only able to meet about 30 percent of the total demand.”

The PFY yarn (HS codes 5402.3300 and 5402.4700) was subjected to a higher customs duty of 11 percent and additional customs duty of two percent.

Polyester was a value chain item, in its cascading already has a two percent additional customs duty on the yarn level, which PYMA has been opposing for three years. However, it has not been abolished which would have an effect of 4.5 percent, he explained.

Lamenting protectionism, he said that polyester filament yarn was subjected to anti-dumping duty ranging from 3.25 percent to over 11 percent from imports originating from China and Malaysia, which fulfilled 80 percent need of the local industries. The protection available to the local manufacturers was already excessive, and with further imposition of 2.5 percent RD in the current budget, it would be grossly unjust and a disincentive for exports and industrialisation, Hanif said.

“Proposed budget calls for a three percent value-addition tax to be collected from commercial importers of PFY at the import stage. Commercial importers of raw materials like PFY sell their goods to SME sector at a minimal profit. This is clearly a very harsh and unrealistic tax and would end up increasing the cost to SMEs sector,” Hanif feared.

“We appreciate the fact that the government has reduced the withholding tax on commercial importers from three percent to two percent under erstwhile SRO 1125 while the withholding tax on industrial importers is one percent. We believe that the WHT should be uniform for both classes of importers considering that government intends to remove the discriminatory withholding tax regime for other sectors,” the PYMA chairman concluded.