Zero-rating facility under RGST: leather industry urges government to remove confusion

The leather industry has urged the government to remove confusion under the 'reformed GST' system regarding the facility of zero rated sales tax, already available to the export-oriented sectors including textile, leather, carpets, sports goods and surgical goods, and contended that the government should avoid making any change in the present system as unscrupulous elements could come back to cause huge loss to the national exchequer through flying invoices.
There is confusion among the exporters whether the present zero rated tax system would continue or not, following implementation of the 'reformed' GST system in line with the IMF conditionalities. "Indeed, this needs to be clarified by the government to satisfy us," said a leading leather exporter, Agha Saiddain, while talking to Business Recorder here on Tuesday. He said that the government should continue and maintain status quo for the zero rating facility, already provided to five sectors.
He said that the government had prepared a working paper that highlighted corrupt practices regarding filing of flying invoices by some unscrupulous elements that caused billions of rupees' losses to the national exchequer. The paper also disclosed that the government had paid substantially more on account of refund than what it received under the sales tax head. The situation forced the government to exempt five export-oriented sectors, including leather. The exemption enabled the government to save huge amount of money which was being paid on account of sales tax refund, he added. "Other countries do not charge any kind of tax on their exports; rather they facilitate them in view of exporters' crucial role in economic development," he added.
Saiddain said that a number of companies were registered under the sales tax just to get sales tax refund through flying invoices. "Some of these elements became millionaires, without setting up any unit, but filed refund claims, while some cases are still pending with the courts," he claimed. He said that the country's bureaucracy should contest its case with the IMF in the light of past experience.
The industry is currently facing tough time, mainly because of the serious economic crisis, impact of floods, huge loss of livestock and deteriorating law and order. Moreover, the input cost has also increased due to significantly in utilities' tariffs as also the prices of raw materials locally and internationally. Apart from these problems, electricity load shedding and suspension in gas supply have also aggravated the situation. "Not only the leather industry, which is on the verge of collapse, but other sectors also need serious attention of the ministries concerned and attractive relief package so that the country could get rid of economic crisis," he added.