Discrimination in issuance of LCs: Stakeholders demand a level playing field

ISLAMABAD: The Senate Standing Committee on Finance, Wednesday, held that targeted Letters of Credit (LCs) issuance is discriminating against the manufacturers and directed the State Bank of Pakistan (SBP) to provide a level playing field to all the stakeholders.

A meeting of the Senate Standing Committee on Finance was held here on Wednesday with Senator Saleem Mandviwalla in the chair. The Senate committee deliberated on a selective opening of LCs to import EV cars in the country. Muhammad Akhtar Javed, executive director SBP, apprised that one window was provided in December to facilitate port clearance, however, an import ban has been lifted in July and no LCs have been halted since then.

Senator Mandviwalla stated that targeted LCs issuance is discriminating against the manufacturers and directed the SBP to provide a level playing field to all the stakeholders.

Senate Standing Committee on Finance has shown displeasure over delay and interference in the opening of LCs.

The committee expressed its displeasure at the State Bank's interference in LCs and wanted to know why the LCs were cancelled.

Chairman Committee Mandviwalla remarked that those stopping LCs should also be told to the committee.

The committee chairman was of the view that the governor and deputy governor SBP must stop opening of selected LCs in future.

The issue of non-payment of refunds by the Federal Board of Revenue (FBR) to private companies was also discussed at the committee meeting. The official of the company stated truckloads of papers were sent by it but refunds were withheld for the last four years.

Member Inland Revenue Operation stated that refunds will be given if supplies were made to the zero-rated sector. The committee directed to pay the refunds of the private company early and added that the chairman FBR personally look into this issue.

Furthermore, the Senate Committee took stern notice of 400 p.c. increase in tax on payment through debit/credit card. Senator Mandviwalla stated that the increase is not likely to result in generating revenue, but rather, it will pose hurdles for students studying abroad.

The FBR chairman apprised that the increase was incorporated as a policy within the Financial Act 2023 and had been proposed by the SBP. The committee recommended the FBR reduce the tax at minimum.

Responding to this, the FBR chairman stated that it is not a revenue measure, but a documentation measure. As it is part of the Finance Act 2023, the change is only possible in the next finance bill.

The advance adjustable withholding income tax on debit and credit card payments remitted outside Pakistan was introduced by way of the insertion of Section 236Y in the Income Tax Ordinance, 2001 through the Finance Act, 2022. An amendment was brought in the section to increase the rate of the advance withholding tax.

The rate was raised from one percent to five percent for filers and two percent to 10 percent for non-filers. The rates were increased to discourage the outflow of foreign exchange on non-essential purchases made through debt and credit cards. However, this tax is adjustable against the tax liability of the person to be declared for a tax year in the income tax return to be filed, he added.

Moreover, as to the appointment of Board Members of the Competitive Commission of Pakistan (CCP) and presidents of NBP and ZTBL. Officials stated that four members of the CCP have been notified and a chairman has also been appointed among these members, which fulfils the requirement of having a minimum of three members for effective decision-making. In addition to that, the president of NBP was appointed yesterday and a discussion for the appointment of ZTBL president is currently in progress and the process will be concluded in a matter of time.

The meeting was attended by senators, Farooq Hamid Naek, Saadia Abbasi, Faisal Saleem Rehman, and Muhammad Talha Mahmood. Additional Secretary Finance Division Amjad Mahmood, Chairman FBR Amjad Zubair Tiwana, Member Customs Operations Zeba Hai Azhar, Executive Director SBP Muhammad Akhtar Javed, and other senior officers of relevant departments were also in attendance.

Copyright Business Recorder, 2023