The Lahore Chamber of Commerce and Industry (LCCI) has urged the Federal Board of Revenue (FBR) to withdraw the amendment to SRO 1125(I)/2011 dated 31.11.2011 which were introduced through SRO 491(I)/2016 dated 30.06.2016, under which input tax credit or refund of packing material of all sorts has been disallowed.
LCCI President Sheikh Muhammad Arshad in a statement said that this will have far reaching consequences for the nascent packaging industry established in the country. Most of the packaging industries are supplying packing material to the exporters and are duly registered for sales tax. The denial of input tax/refund to exporters will encourage them to make purchases from unregistered persons so that only 1 percent tax is required to be withheld, instead of making purchases from said registered manufacturers/suppliers who will charge 17 percent sales tax, he added.
The business of registered manufacturers/suppliers of packaging material will, therefore, come to a standstill and they will be forced either to close down or to de-register themselves and go in the unorganised sector, he maintained. The problem will be aggravated in view of the fact that most of the large exporters/ export-houses will obtain DTRE for import or local purchase of various items including packing material. They will import packing material free of customs duty and sales tax under the same scheme and there will be no need for them to make purchases either from registered suppliers or from un-registered suppliers, the LCCI President said.
He said that this would cause loss of local economic activity resulting in huge revenue loss to the national exchequer. "Even where the said exporters will make local purchases under the DTRE against zero-rated invoices, the manufacturers/suppliers will be required to seek refund of input tax for supply against DTRE which may not in fact be available under the amending SRO 491(I)/2016. This will ultimately pile up huge amount of refunds of SMEs which are already working with every limited capital of Rs 10 to 20 million", he added.
As a result, the registered SMEs manufacturing/supplying packing material to exporters will not be able to continue their businesses. It is a case of anomaly and a consequence not apparently considered while issuing SRO 491(I)/2016 dated 30.06.2016, he said. The LCCI President urged the Federal Board of Revenue to resolve the issue in such a manner that registered SMEs are able to continue their business and to supply packing material to exporters/export houses.
Comments
Comments are closed.