Bringing certain textile sectors into GST net: National Assembly panel decides to invite FBR chief to resolve issue

National Assembly Standing Committee on Textile Industry has decided to invite Federal Board of Revenue Chairman to resolve the issue of bringing services, sizing and power looms sectors of textile chain into GST net. The committee met with Haji Akram Ansari MNA in the chair here on Wednesday. The meeting was scheduled to discuss negative impact of power loadshedding on textile sector, the lost foreign exchange earning sector of the economy.
The committee took serious notice and expressed dismay over the absence of Managing Directors of Pepco and KESC from the meeting despite many invitations. The members of the committee demanded of the chairman to issue summons and even then if they fail to attend meetings, warrants be issued to ensure their presence in the meetings. The committee did not allow the representatives of KESC to represent their chief in the meeting.
Representative of Pepco present in the meeting was not sure when power loadshedding would be eliminated for the textile sector, however, he informed the meeting that some 3000MW power has been added to the system and the demand is mounting from 8 percent to 10 percent annually creating a huge mismatch between demand and supply.
He said whenever additional power is available, the textile sector would be the priority and it would be exempted from loadshedding. Haleem Aslam Malik, Chairman Textile Sizing Association of Pakistan informed the committee that the FBR had earlier issued SRO 238 to impose tax on local sales of the textile sector and 6 percent GST was imposed on spinning sector and 4 percent GST was imposed on processing sector.
However, service sector of the textile industry ie power looms, sizing, hosiery and towels sectors were exempted from GST. Later, the FBR revised the GST regime for textile sector by issuing SRO 1181 and again issued SRO 1125 through which it also extended the scope of GST on sizing and power looms upon sales to unregistered buyers. Sizing sector and power looms have been included in processing sector and rate of GST was revised from 4 percent to 5 percent.
The issue is lingering from last two years and no solutions have come out despite having many rounds of negotiations with tax authorities. The representative from sizing industry informed the meeting that sizing is a cottage industry and should be rescued from this crisis as major portion of the industry is un-registered and a small portion is registered.
He further informed that during a recent meeting with tax authorities a proposed amendment was prepared, however, no progress have been made on the issue and Chairman FBR is not able to meet the representative of the industry due his official engagements. Secretary Textile Industry informed the committee that the FBR authorities are of the view that they intend to document the undocumented sectors. Rashed Godial MNA said without documenting the economy, how could tax collection be improved. He suggested that they should get themselves registered and the facilities available to the registered units. They were also of the view that during the month of Ramazan, the textile sector is likely to face more power shortages, as they government would ensure power supply to the residential sectors especially at Sehri and Iftar timings and would curtail supplies to textile sectors.
Pakistan Apparel Forum representative Javed informed the textile committee that textile units located at Karachi are facing most difficult times as the KESC administration has started disconnecting their power connections upon usage of captive power facility.
KESC is of the view that captive power cannot be used as stand by power supply source and if the textile units are ready to ensure usage of 50 percent power from KESC source then they would not be subject to power disconnection at a time when KESC doesn't have power for supply.
He informed the committee that when they approached Nepra, the Nepra authorities decided the matter against KESC and KESC authorities got stay order from the high court. The next hearing is on August 2, 2012. After getting stay order from high court, the KESC again started disconnecting power connections of the textile units and hundreds of units are facing notices as well as disconnections in Karachi.
Nepra member present in the meeting informed the committee that stand-by provision contained in the Nepra would explain before the high court on next hearing of the case so as to restrain the KESC authorities from disconnecting the power connections of textile units.