The sales tax regime in the country favours those who sell locally over those who export. The notion has been proved in the new Federal budget by exempting ginned cotton from sales tax.
This was stated by Quota Supervisory Council (QSC) member Azhar H. Elahi, while commenting on the new budget.
He said that as most of the spinners and composite mills sold locally, they had been best placed in the textile chain to get their sales tax back quickly by setting off their input tax against their output tax. They were the least affected by the sales tax regime as they had been exempted from this tax, he said.
Contrary to this, he continued, the exporters had to prove the genuineness of each and every invoice, prove consumption of the materials and then wait in a long queue for getting refund.
Azhar pointed out that by exempting ginned cotton alone from the levy of sales tax "our taxation mandarins" did nothing for the ailing ancillary, weaving and value-added textile sectors, while the spinners and composite mills were benefited doubly.
He said now they would not have to pay sales tax on their purchases, thus conserving their working capital, besides collecting sales tax from their customers and holding onto these funds as a free float till the next date for deposit with the treasury.
The QSC member said that he had been advocating since long that the entire cotton chain be exempted from sales tax to avoid shortfall under this head.
He gave the following reasons to justify his suggestion:
-- More than 80 percent of our cotton was exported in one form or the other.
-- There is administrative costs related to tax collection.
-- There are tax leakage's in our tax collecting machinery.
-- Our taxation authorities are liable to sanction refunds where none are due.
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