Textile bodies' recommendation: 'inputs be declared zero-rated under RGST'

All textile associations of the country have recommended that all the five stages of manufacturing be declared intermediary and inputs zero-rated until the finished products, under the Reformed General Sales Tax (RGST).
According to sources the textile associations recommended that all five stages of manufacturing ie ginning (including cotton seed), spinning, weaving, knitting finishing and processing be declared intermediary and all inputs up to finished stage should be zero rated.
The local supply of textile and articles thereof should be zero-rated in RGST regime in line with the current Sales Tax Act, 1990. Sources revealed that representatives of the associations met the Textile Minister Rana M Farooq Saeed Khan on Tuesday and gave him a detailed presentation on the impact of RGST on the textile sector. After the meeting the heads of textile associations and stakeholders submitted a signed paper (containing their joint recommendations and proposals) to the minister and requested that these be forwarded for consideration.
The National Assembly Standing Committee on Finance has also constituted a sub-committee comprising representatives of textile industry and Federal Board of Revenue to discuss and resolve the concerns of the industry on 'Refund System' under the RGST. Sources privy to the meeting revealed that the Minister assured the stakeholders of his full support. They recommended that all the inputs and services used in all these intermediary textiles should be zero-rated to avoid refunds on flying invoices as 85 percent of the textile products are being exported in one form or the other.
Similarly the whole value chain should maintain complete record/documents as per the RGST law. The RGST may only be imposed on the retail sector at 2.5 percent to 5 percent, the recommendation said. According to the presentation, in last two years, the input prices have increased about two to threefold, which has created a liquidity shortage within the textiles value chain. Moreover, power looms are not organised sector and it would be difficult for them to adjust in new RGST regime.