Federal Board of Revenue (FBR) is actively considering to amend the SRO 231(1)/2011 to redress procedural anomalies and apprehensions expressed by the exporters, said Dr Muhammad Iqbal, Commissioner, Inland Revenue Services Faisalabad addressing a meeting of textile exporters to explain the new sales tax amendments introduced recently by the FBR here at PTEA , on Tuesday.
Dr Iqbal conceded that the industry in Pakistan was overburdened and FBR was making conscious efforts to facilitate the industry by taking fundamental steps. He explained that in the recent SRO only exports are zero rated, while domestic consumption is taxable. Regarding who will pay and claim the sales tax has some ambiguities and FBR was considering it at the highest level and hopefully this issue would also be solved within next two or three days.
Sales tax is to be paid by the end consumers and exports are generally zero rated all over the world, he said and added that same is the case in Pakistan. In some cases exporters have to pay sales tax, which is ultimately refunded to the registered claimants, he said. He said according to the previous procedure, the domestic supplies were also exempted from the sales tax, which further widened the gap between tax to GDP ratio. He said that our tax to GDP ratio is minimum, as compared to other countries. It is 9 percent, while its 17.7 percent in India; he said and added that it is 40 to 50 percent in Scandinavian developed countries.
Answering the questions raised by Sheikh Mukhtar Ahmad regarding confusion in procedural hurdles, he said that ERS system (Expeditious Refund System) has been introduced by the FBR to settle the refund claims within 15 days. Most of the cases are being settled at FBR level while only 89 claims have been deferred and sent back to this RTO, he said. Most of the cases lack proper documentation. He asked the exporters to contact him to ensure their expeditious settlement.
Welcoming the guests, PTEA Chairman, Wasim Latif thanked them providing the members and opportunity for exchange of views on matters of mutual interest. He introduced the profile of the Association and highlighted the role of PTEA members in economic development of the country.
Wasim highlighted the promulgation of new ordinances by President of Pakistan and sales tax notification SRO 231(1)/2011 and said that there is some confusion among our members regarding the above mentioned ordinances/amendments on withdrawal of zero rated facility on sales tax on textile exports. In SRO 231(1)/2011, words "BETWEEN" and the words "AND EXPORTERS" created ambiguity. He pointed out that word between implies that only transactions between registered manufacturers-cum-exporters will qualify for zero rating facility. Practically the exporters purchase raw material textile yarn from open market, from yarn traders who are not exporters. Yarn traders will charge sales tax from exporters then where is zero rating, he asked. Similarly commercial exporters get fabric from powerlomers (who are not exporters) and get it dyed, printed from processing units, they will charge sales tax and then where zero rating stands, he added.
Pin pointing the other problems, Wasim said that huge amount of working capital of textile exporters was held up in refund regimes of Sales Tax and Special Excise Duty creating liquidity crunch and hampering the export growth and turn over. Large number of refund claims are lying unprocessed with the department without any cogent reason and exporters are being made to suffer for no fault of theirs, he said. He urged the regional collectorate to facilitate the textile exporters releasing their blocked funds to enable them to concentrate on promotion of their exports. Large number of textile exporters attended the meeting.
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