New budget: APTMA fears high business costs

Spokesman All Pakistan Textile Mills Association (APTMA) apprehended increase in the industrial cost of doing business and high inflation due to various budgetary measures introduced for the fiscal year 2013-14. Textile industry cannot sustain and export inflation, he said.
The federal budget for 2013-14 has added another 2 percent as Further Tax on supplies to unregistered persons, which would encourage re-introduction of fake registrations and flying invoices, he apprehended. The FBR had withdrawn the zero rating regime for textile industry after due deliberations and reduced the rate to 2 percent irrespective of supplies to registered or unregistered persons within the five zero rated sectors. The addition of 2 percent Further Tax would again create an arbitrage alluring tax officials and fake companies to register temporarily to do business of flying/fake invoices.
It may be noted that the FBR, in its pre-budget discourse with the industry, removed the difference in rate of tax between the registered and unregistered to check fake flying invoices phenomenon, he recalled and added that the budget speech presented an entirely different picture from what the FBR and industry had agreed upon.
He said the Further Tax on supplies would increase the cost of doing business for industry making textile products unviable in the international market. The industry is already exposed to unprecedented gas and electricity shortage and losing almost 50% of production capacities. Furthermore, said spokesman APTMA, the federal budget 2013-14 provided legal backing to the CREST for verification of input tax of the textile industry supply chain. This system is already causing discrepancies on industry sales due to technical hitches leading to unnecessary notices and harassment. The FBR should improve the CREST system to overcome discrepancies to avoid undue hardships to the taxpayers, he stressed.
Also, he said, the FBR disallowed input tax adjustment in a situation when refunds of billions of rupees of the textile industry are already stuck up with the system. He urged the Finance Minister to issue direction to the FBR for liquidating all pending refunds of sales tax, income tax and customs, enabling the industry to meet liquidity requirements.
Similarly, said APTMA spokesman, increase in the turnover tax from 0.5 percent to 1 percent is likely to increase the volume of income tax refunds. He further pointed out that the rate of initial depreciation reduction from 50% to 25% for plant and machinery is likely to discourage further investment, which is necessary for achieving economic growth.