Textile exporters demand zero rating, lower taxes

KARACHI: The value-added textile exports associations in their budget proposals have demanded the federal government to restore zero-rating, continue duty drawback of taxes (DDT) and Technology Up-gradation Fund (TUF) scheme, and to lower final tax and withholding tax in Budget 2021-22.

Addressing a joint press conference at Pakistan Hosiery Manufacturers and Exporters Association (PHMA) House on Wednesday, leaders of the associations demanded to reduce WHT rate to 0.5 percent, to suspend Export Development Fund (EDF) surcharge, and to reduce and fix tariffs of electricity in the forthcoming budget.

Council of All Pakistan Textile Mills Associations Chairman Zubair Motiwala, Pakistan Apparel Forum Chairman Jawed Bilwani, PHMA Chairman Tariq Munir and other leaders of different associations participated in the joint press conference.

Motiwala said they have submitted budget proposals to the federal government wherein the top demand was to restore zero rating on GST “No Payment No Refund Regime” through revival of SRO 1125 in letter and spirit. The demand was made because SME exporters have been closed down and decreased by 30 percent as compared to last year due to imposition of 17 percent GST, which blocked precious liquidity.

They highlighted that despite Covid-19, textile exports have increased by 17.35 percent as compared to last year and would reach $15.50 billion in FY 2020-21. They said that it was on record that due to commencement and payments of DLTL scheme in 2009, textile exports had increased by 7.3 percent in 2010 and by 35 percent in 2011. However, in 2012, textile exports decreased by 10.66 percent due to withheld payments of DLTL.

With the introduction of TUF scheme in 2009, 30 percent capacity of textile sector has been enhanced. Therefore, it is imperative to reinstate TUF scheme for the next five years.

The speakers said that 0.25 percent EDF surcharge was deducted from export proceeds of the exporters for export development since 1992. Collection of EDF surcharge was approximately Rs9 billion annually. Presently, the government has Rs58 billion in its kitty on account of EDF.

Hence, they demanded the government to suspend collection of surcharge till the Rs58 billion of EDF was exhausted.

Exporters fall under Final Tax Regime and required to pay one percent WHT of their export proceeds. They demanded that WHT should be reduced from one percent to 0.5 percent for exporters as this would also help the exporters in using the cash liquidity for enhancement of exports.

The present government had announced separate tariff of gas and electricity for export sectors with an assurance that this tariff would last for three years. However, tariff of gas and electricity was enhanced after a year.

To compete internationally and capture more markets, it is crucial that tariff of electricity, indigenous gas and RLNG for exporters should be fixed at 7.5 cents/kwh, Rs819/MMBTU and $6.5/MMBTU respectively for the next five years and the same should be applied countrywide.