Textile sector: import of machinery, raw material should be zero-rated, says Balwani

Government decision to impose 17 per cent sales tax on import of textile machinery, equipment and its parts for manufacturers-cum exporter would multiply liquidity problems of the textile units.
Talking to Business Recorder, Chief Co-ordinator Pakistan Hosiery Manufac-tures Association and Convenor Council of All Pakistan Textile Association (CAPTA) Javed Balwani said that import of machinery and raw material for the textile sector should be zero-rated
However, he said, the revised statutory regulatory order (SRO) on zero-rating would not only encourage documentation in textile sector but also increase revenue collection. The retail sector of the textile chain should also be documented. Initially, the FBR should impose 4-5 per cent lower rate of tax as final discharge of their tax liability.
Giving an innovative proposal to document the retail sector, Balwani suggested that the FBR should introduce a lottery or consumer lucky draw scheme to encourage the customers to obtain invoices from the retail outlets. The area-wise lottery scheme or consumer lucky draw would encourage the customers to obtain receipts or invoices from the big shops.
He said that smuggled items were also being sold in the retail market. About 99 per cent of the children garments were imported and if the government would impose duty on retail sector, it would certainly result to overcome trade deficit, he added. Balwani said that the textile industry confronted with many challenges as the raw material was going out of the reach of the industry. Yarn cotton prices registered an increase of 300 per cent as compared to the last year.
The government decision to impose sales tax on import of machinery would further worsen the situation for the textile industry. Balvani said that import of machinery and raw material for the textile sector should be zero-rated. About the new arrangement, he stated that the changes in the zero-rating regime of five export sectors through SRO.231(I)/2011 has encouraged a number of persons to obtain sales tax registration for availing the benefits of zero-rating facility.
The FBR has restricted the sales tax zero-rating facility of five export sectors including textile, leather, surgical, sports and carpets to only registered manufacturers-cum-exporters or exporters. He further said that the reduced rate of 6 percent sales tax to be charged at yarn stage and 4 percent on dyed fabrics for un-registered persons that would have positive result on the local industry.