Prospects for value-added textile growth under GSP Plus status are gradually dimming as local textile products are forecast to turn uncompetitive in EU markets in the wake of government's 'imprudent' duty and taxation policy for the sector and India's big tax relief to its exporters, industry sources said on Saturday.
Exporters termed the government plans to impose five percent tax on imports of cotton yarn and to increase sales tax, for value-added textile sector, to five percent as 'hostile' policies. "The government is turning the GSP Plus advantage dead through its taxation policies," they criticised.
On the contrary India gives seven percent tax relief to textile exporters for EU and US markets, they said, adding that "Indian exporters will have now two percent tax relief under Duty Credit Scrip (DCS) to land their goods in EU and US markets, an increase of five percent in rebate, cumulatively a seven percent relaxation".
The Indian government's move will offset Pakistan's advantage of GSP Plus for textile goods in EU markets, said chief co-ordinator, Pakistan Readymade Garments Manufacturers and Exporters Association (Prgmea), Ijaz A Khokhar.
"Pakistan's value-added textile sector is undergoing a stress of double-impact, one from Pakistani government and the other from Indian government," he said, adding that the government should attain a similar concession for apparel textile exporters to compete with India in the US markets.
He said Bangladesh has inked a long-term accord with the key global buyers of textile goods while Indian government's move of big tax relief will upstage the country's exports.
Pakistan has only a nine percent tax and duty advantage in the EU markets under GSP Plus regime, he said, adding that the India plans to provide a seven percent relief to exporters, thus we are left with just two percent edge while we face energy shortage and costly utilities.
"Pakistan's survival in the EU and US markets is at risk if the government imposed five percent duty on cotton yarn import and increases sales tax from two to five percent," Khokhar showed concerns.
He said the apparel textile sector is faced with energy and raw material shortages and high utility charges which scales back output significantly. "Manufacturing units are functional just at 40 percent capacity since electricity and gas are short and expensive," he viewed.
Global buyers, he said, are in a 'perfect' grip of Indian and Bangladeshi textile exporters, which is a challenge to the country's ailing and undersized sector to compete with its rivals in world markets.
"Khuram Dastagir is due this month in US, he should seek five percent duty concession from the US for Pakistan's value-added textile sector," he said, adding that India has a specialised textile ministry. Pakistan also needs badly such a ministry to sort out its industry issues locally and globally.
He feared any kind of taxes will worsen local exports condition on global competitive markets. Khokhar said the government's fluctuating tariffs mechanism for utilities also has made it difficult for exporters to confirm their deals with the global buyers as a large number of them are sceptic about Pakistan's timely shipment of the consignments.
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