All Pakistan Cloth Exporters Association (Apcea) has demanded reduction in import tariff on raw material for export goods, abolition of sales tax on raw cotton, slashing down sales tax rates to 10 percent, removal of additional 3 percent sales tax and simultaneous continuation of SRO-410 and DTRE regime.
Briefing newsmen about proposals for the forthcoming budget here on Friday Ahmad Kamal, Chairman Apcea, said that the high rate of import tariff on raw material is causing price hike of cotton yarn and polyester yarn in domestic market.
He said: "Import tariff on polyester fibre, polyester chips and chemical dyes, especially caustic soda, is over protected by the excise duty." Pointing out hassles of DTRE scheme, he said, "the exporters of value-added and finished goods are regularly buying imported raw material items for use in their made-up exportable items and garments from the local market."
"These items", he said "are an essential component of the exportable goods and their smooth inflow is imperative for manufacturing and finishing of exportable goods."
"The DTRE scheme envisages non-payment of duties from the initial to the last stage. But the importers from whom they are buying their raw material components had paid their duties on these items and are not prepared to go through the exercise of filing returns and claiming refund in the lengthy, complicated duty draw back and tax refund regime and are also afraid of getting their huge liquidity blocked in draw back and refund regime.
Hence the importer suppliers are not prepared to sell their goods without duties and tax. It is therefore, not practically possible for exporters to avail the benefits of DTRE, he added.
"Hence it is important that SRO-410 be continued simultaneously with DTRE until improvements in DTRE for smooth flow of export of vale-added finished goods garments," he said.
He also demanded that duty on import of machinery and spare parts should be abolished to sustain competitiveness of Pakistani exports in international market.
PRICE HIKE: Commenting on the recent price hike of cotton yarn, the Apcea chief said, "more than 85 percent of the cotton produced in the country is exported in one form or the other (ie raw cotton to finished goods). On purchase of this seasonal product huge funds of exporters/manufacturers remain blocked for long time, causing liquidity crunch to exporters.
He demanded that sales tax on raw cotton be removed to facilitate the manufacturer/exporters and save them from hassles of refund regime.
He said: "Prevailing rates of sales tax are quite high resulting in increase in cost production and making Pakistani export incompetitive.
He apprehended that Pakistan would lose hard-won export markets if exports were not competitive in tough open market competition in post-quota global market. The market setback would be an irreparable loss to the country and high slabs of sales tax rates are the main reason for tax evasion. He demanded that sales tax rate may be reduced to 10 percent.
SALES TAX REFUND SYSTEM: Regarding sales tax refund regime Ahmed Kamal said that the current refunds system is very complicated and exporters refund is delayed over time. Resultantly, the exporters suffer blockage of their refund and wastage of their time in procedural formalities.
He also demanded that the sales tax refund system may be based on profiling so that the established genuine exporters may be able to get their refund within 72 hours without going through the formality of audit system. The audit in such cases could be carried out later on if so required.
The Association chief said that the Pakistan Sales Tax Act was in fact adopted from the British Value Added Tax (VAT), which allows adjustment of input sales tax paid on all purchases except cars.
However, CBR vide SRO 578/(1)/98, dated June 12, 1998 has disallowed a whole range of items leaving only a handful items of small value on which input tax can be claimed.
Items on which input tax cannot be claimed include vehicles, building materials, office equipment, furniture, fixtures and furnishings, telecommunication equipment, generators and generating sets, crockery, cutlery and utensils and POL products.
To make the investment more attractive, he suggested that sales tax law be adopted in its true spirit.
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