The Federal Board of Revenue (FBR) will take new initiatives to facilitate textile sector by addressing their concerns through new anti-smuggling strategy, upward revision of customs values on import of fabric/garments, possible regulatory duty on import of cotton yarn, changes in Expeditious Refund System (ERS), speedy payment of duty drawback/sales tax refunds, clearance of second-hand/used clothing under ''Red Channel'' and processing of 40 pending cases of sales tax zero-rating on electricity/natural gas supply to textile units.
Sources told Business Recorder here on Friday that the FBR has taken the decisions in the last meeting with All Pakistan Textile Mills Association (APTMA) and other associations at the FBR House. A committee was formed by the Minister for Finance to discuss and resolve the problems being faced by the APTMA. Accordingly, meeting in this regard was held in FBR House Islamabad which was chaired by Haroon Akhtar Khan, Special Assistant to the Prime Minister for Revenue and was attended by the representatives of All Pakistan Textile Mills Association (APTMA), Pakistan Textile Exporters Association (PTEA) and the Garments Manufacturers Association.
The issues underlined by the textile sector included viability of textiles in export and domestic markets, irritants in textile export growth, pending cheques against FED/SED refund claims, sales tax deferred claims replication issue, income tax refund u/s 65(B) & 65(E), income tax exemption of raw materials under SRO 717, duties and taxes on coal import, pending incentives of previous textile policy 2009-14 and outstanding claims of incremental textile exports under textile policy 2014-19.
Representatives of the trade bodies informed in detail that both the exporters and the local suppliers of textile items are facing host of problems due to which they are losing competitive edge in international and domestic markets rendering their viability at stake, resultantly investment in textile sector has come to a halt, sources said.
The issue raised by textile sector revealed that there is exponential increase in imports of second-hand/used clothing in the country and new fabric/garments are being brought there-under undeclared which is affecting the domestic sale of textile items. Secondly, quantum of textile items smuggling into the country has also increased in the garb of Afghan transit trade. Responding to this, FBR has decided that the imports of second-hand/used clothing from all origins shall pass through WeBOC Red Channel. However, in order to avoid choking of terminals, percentage of examination of the imported consignments shall be done on the basis of selectivity criteria as imports from sonic of the origins like Korea, UAE etc are considered more risky.
The FBR has also decided that government is devising a comprehensive strategy to combat menace of smuggling which will be announced shortly. The industry raised the issue that the valuation of imported fabric/garments and second-hand clothing is very low which needs to be revised upward along with customs duty thereon. It has been decided that the Customs Wing of FBR shall constitute a committee to examine the present value of imports of fabrics, garments and second-hand clothing and to consider present custom duty structure thereon.
The industry pointed out that the import of cotton yarn at present rate of 5% Custom duty is adversely affecting the local spinning industry. Therefore, appropriate measures may be taken in this regard including imposition of regulatory duty on import of cotton yarn. The FBR responded that an inter-ministerial committee comprising representatives of the Federal Board of Revenue, the Ministry of Textile Industry and the Ministry of Commerce was constituted to give recommendations regarding imposition of regulatory duty on import of cotton yarn.
Sources said that the textile sector raised their voice against Model Customs Collectorate Faisalabad saying that the duty drawbacks are not being paid, particularly in Faisalabad. The FBR has decided that the instructions would be issued to all Collectorates to expedite payment of admissible duty drawback claims. The industry was of the view that the customs duty on import of coal has been increased in budget 2015-16 which is hurting the textile sector. Therefore, duty free imports of coal may be allowed under SRO 327 (EOU Scheme). The FBR informed that during 2014-15, textile units have imported just 70,000 MT of coal out of total imports of 5.2 million MT. Secondly, it is a considered policy not to allow duty free imports of fuels under export facilitation schemes like DTRE, Manufacturing Bonds, EOU etc. Only such inputs are entitled to benefit of duty free imports under these schemes which are directly used in the manufacturing of goods to be exported.
The textile sector informed the FBR that Expeditious Refund System (ERS) for payment of sales tax refund claims entertains those claims where the refund was suggested that the said threshold needs to be increased. The FBR Member (IR-Operations) agreed with the proposal. It was decided to appropriately increase the threshold.
The textile sector raised the issue that the field offices are making cases on supply of yarn to unregistered persons on the ground that the same has been supplied to the person not in the five sectors referred to in SRO 1125(1)/2011 dated 31.12.2011. They complained of harassment to the textile units on this issue. Responding to this, FBR Member (IR-Operations) informed that on a specific query, the guidelines on this issue were sent to RTO Gujranwala and the same will be now circulated to all field offices to ensure uniform practice and resolve the highlighted issue.
Textile representatives observed that the field offices are not implementing overruling instructions in respect of Processing of sales tax refund claims. The FBR decided that instructions shall be issued to the field offices in this respect. The textile sector informed the FBR that the processing of cases regarding zero-rating of utilities was pending for a long-time with the board. The same should be given due priority. The FBR Member IR-Operations said that only 40 cases are pending with the FBR and the same shall be decided at the earliest.
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