President of Multan Chamber of Commerce & Industry (MCCI), Shahid Naseem Khokhar has urged the government to keep the zero-rating status of exports of value added textiles, carpet, leather and surgical, and sports goods intact under Reformed General Sales Tax regime, otherwise, these sectors would be forced to go on strike to protest against the irrational move.
Assuring full support to the zero-rated sectors, Khokhar said that the government's decision of removing zero-rating facility on the export of goods, related to five leading export-oriented sectors, will not only have disastrous implications on the country's economy, but also open new doors of corruption. He clarified that exporters are not against imposition of RGST but they want to maintain the existing regime of sales tax on five zero-rated sectors by the government.
"We were not taken on board about the decision of implementing RGST on textiles, surgical leather and other exports, which have been enjoying zero-rated facility since 2005," he informed media. "It is really apathy that the government is bent on repeating the mistake of collecting Sales Tax and then returning which is taking the exporters to the dark ages," he added.
He noted that the new tax law proposes withdrawal of 2005 Sales Tax regime for the five zero-rated sectors from five export oriented sectors which is against the policy of the government, wherein any sector with 80 per cent or more of the country's production being exported cannot be subjected to sales tax for the simple reason; avoid depositing and refunding without any significant gain to the national exchequer.
MCCI president said, "It is encouraging to note at one time, the seriousness of the government to enhance textile exports by giving a target of US $18 billion by year 2015 and $25 billion by 2020 by the then finance minister. For this purpose, textile policy for the first time in the history of Pakistan was announced and implemented with the package of Rs 42 billion, despite severe financial crisis in the country.
Furthermore, the government very ably contested the case of Anti Dumping Duty imposed by EU on textile exports from Pakistan, which was not only revoked but 75 items were also allowed Duty Free Access by the European Union".
In view of the stated position of the government to enhance exports of the zero-rated sector, the decision to withdraw zero-rating can only be considered contradictory to its defined position of giving momentum to exports. Speaking on the occasion, a leader of Value Added Textile Forum, Syed Muhammad Aasim Shah said, "All over the world, exports are zero-rated, and we propose FBR to generate revenue and get funds from other sales which are not paid back instead of punishing the manufacturers-cum-exporters. This is because sales tax is taken and then given back involving large government machinery, which includes collectors, auditors and staff, for which the government has to incur huge amount of money on such overheads.
He feared that through introducing RGST on exports, bureaucrats and tax officials would make money. This system would increase flying invoices, over invoicing, fraudulent companies and fake declarations by exporters and tax officials. Aasim recalled that even last year, it is on the record that FBR suggested to withdraw zero rating and a presentation was given on the pros and cons of our proposals to then Finance Minister, Shaukat Tarin who brought with him the then Governor; Chairman, FBR; Secretary Finance and host of other officials.
At the conclusion of the meeting, it was there and then decided that withdrawal of 2005 Sales Tax Regime for the five zero rated sectors was not in the interest of the country as it would not yield any significant amount for the national exchequer as more than 80 percent of production is exported.
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