Withdrawal of zero rating: Textile industry irked by facts' 'misrepresentation'

The country's textile industry has strongly protested against what it says misrepresentation of facts by the Federal Board of Revenue (FBR) at a recent meeting of National Assembly Standing Committee on Finance, sources close to Prime Minister Advisor on Commerce, Industries and Production and Investment, Abdul Razak Dawood told Business Recorder.

The textile industry conveyed its concerns to the Chairman Standing Committee Faiz Ullah Kamoka through a letter, copies of which have been sent to all the concerned authorities including Razak Dawood and FBR Chairman Shabbar Zaidi.

According to the industry, during the meeting FBR claimed that withdrawal of zero rating was done in consultation and agreement of the industry in lieu of the energy package that was extended to the industry.

"We strongly protest at the misrepresentation of facts. Zero rating was withdrawn on the pretext by FBR that domestic sales constituted 50% of all sales from the textile sector and paid little or no sales tax on it," APTMA said in the letter.

The textile Industry, according to the letter objected vehemently at the facts and figures that domestic sales of the sector were no more than 25% of the industrial output and that FBR should tax the point of sale to capture the sales tax potential of the market. In this manner all goods of any origin would be taxed (including imports, legal or smuggled). FBR however proceeded to withdraw zero rating in total disregard of the industry's concerns.

APTMA further claims that despite having announced regionally competitive energy tariffs (electricity at 7 cents per unit all-inclusive and $6.5 MMBTU RLNG/gas) implementation simply has not been done. The all-inclusive power tariff of 7.5 cents/kWh was available to the industry up to June 30, 2019 and the Power Division has thereafter been charging an additional 25% as quarterly tariff adjustment over and above the 7.5 cents defeating the very purpose of a predictable and stable regionally competitive tariff. According to sources, APTMA further claimed that in so far as RLNG/gas tariff of $ 6.5 MMBTU is concerned, the Implementation of this is continuing due to court intervention as SNGPL is still insisting on charging the full RLNG rate of $11.5/MMBTU. They have also substantially increased the 3-month consumption security deposit to reflect the full RLNG rate of $ 11.5/MMBTU soaking up much needed liquidity from the market.

This reversal of the regionally competitive energy prices is coming at a time when exports have started picking up momentum. The letter written by Executive Director APTMA, Shahid Sattar, states that the momentum built up with increasing exports/capacity utilization is being frittered away by the soaking up of liquidity on account of withdrawal of zero rating and the road blocks placed in the implementation of the energy package.

APTMA maintains that only Rs 10 billion of current refunds have been released during the five month period while Rs 80 billion which has been collected will eventually have to be refunded.

"We reiterate that there is no connection between the two issues as is being claimed by FBR," Sattar maintained.

During the Standing Committee meeting, the FBR also claimed that it has collected additional Rs 55 billion taxes from export-oriented sectors without disclosing that it has yet to refund Rs 60 billion of sales tax to the industry.

Copyright Business Recorder, 2019