Textile value chain: National Assembly panel for equitable sharing of tax burden

National Assembly Standing Committee on the Textile Ministry here on Wednesday expressing apprehension over 4 and 6 percent general sales tax (GST) regime on local sales of the textile sector, asked the tax authorities to review the recently announced sales tax scheme to equally distribute the tax burden on value chain and decided to take up the issue with Prime Minister and the Cabinet.
In this regard, the committee also decided to hand over recommendations of the committee on gas and power load shedding, GST and other issues to the textile minister for taking up at the Cabinet meeting. One of the proposals floated by the chairman of the committee was to impose some kind of fix sales tax on the un-registered persons, who are unable to claim refund of sales tax paid on electricity and other inputs.
For example, one percent non-refundable sales tax may be imposed on un-registered persons within the textile chain and avoid over taxation on the un-registered persons. The un-registered persons in the textile chain have been overburdened with taxes which must be reviewed by the FBR.
The committee met in the Textile Industry Ministry and Haji Akram Ansari MNA chaired the meeting, Minister for Textiles Makhdoom Shahb-ud-Din, Secretary Shahid Hussain, officials from Federal Board of Revenue and representatives from textile sector attended the meeting.
The meeting was of the view that there should be 1% GST on each stage of the value chain of the textile sector so as to share the tax burden equitably among the stakeholders as well as achieve the documentation of the entire value chain. Chairman Committee was not optimist that newly introduced sales tax regime for textile sector will work and help realise revenue by imposing 4% to 6% GST on value chain in textile. He said that this sales tax regime would benefit the big players and directly hit the undocumented small power looms. This regime would promote "Muk-Muka" between small scale power loom owners and tax authorities as the entire value addition chain in textile sector have not been included in the said regime, he said.
Chairman of the committee was of the view that increase in tax revenue was necessary, however, he said sales tax regime announced for taxing local sales of the textile sector still need further improvement. He said that the FBR must address the issues of the power loom sector and un-registered persons operating within the textile chain. The issues of the un-registered persons should be seriously considered by the FBR to avoid over burdening the un-registered persons.
Abdul Rasheed Godil MNA from MQM questioned the FBR authorities that how they are going to determine what are the exact exports and what the local sales of a textile unit. He was also of the view that FBR is deliberately avoiding taxing rich and increasing tax burden on poor by imposing indirect taxes.
Rana Asif MNA proposed fixed sales tax on undocumented textile sector and said that fixed tax scheme would help document the entire sector as well as sizeable revenue would also be collected by the federal government. To tackle issue of documentation, he proposed survey of the textile sector for identification of the small-scale units and undocumented units.
The representatives of the textile sector mainly from Faisalabad explained their difficulties due to the power and gas load shedding, GST regime and demanded that power loom sector should be exempted from power load shedding and it should be added in the definition of textile sector.
The meeting further decided that Director General PEPCO Khalid Ahmed would hold meeting with textile sector representatives in Faisalabad on Monday and an option of separate feeders for the power looms would be explored so as to ensure un-interrupted power supply to the looms sector in the textile city.